Greybull will take on the entirety of Tata Steel UK’s steelworks operations in Scunthorpe, as well as two mills in Teesside, an engineering workshop in Workington and a design consultancy in York along with a mill in Hayange, France.
The combined operations form Tata’s Long Products Europe (LPE) business. Following completion of the deal, the steelworks business will trade under the brand name British Steel.
The sale also includes the associated sales and distribution network.
Tata also confirmed on Monday that it was to contact “many tens” of potential buyers for the rest of its UK steel business, including the sprawling Port Talbot works – adding that it preferred to find a single purchaser.
Commenting on the creation of British Steel arising from the Long Products sale Roy Rickhuss, general secretary of the steelworkers’ union Community, said: “We welcome this major step forward towards a deal which will continue steelmaking in Scunthorpe and secure the future of the Long Products business across the UK.
“Greybull’s interest in the business … demonstrates that with the right investors UK steel making can have a positive future. So far, Tata Steel has honoured its commitment to be a responsible seller of the business by allowing time for the deal to be done.”
Union members at Scunthorpe are currently being balloted on whether to accept a 3% cut in pay and reductions in pension contributions for a year to smooth the path for the deal.
Greybull, which is a British-based investment group, will pay a nominal £1 for the business and has arranged a £400m investment and financing package.
The existing management team will stay on to run the new business, and try to return the company to profitability.
Marc Meyohas, a partner at Greybull, said the aim was to avoid any redundancies, grow the business and become profitable within a year.
“We are delighted to have reached agreement for the acquisition of LPE, which we believe can become a strong business, with a highly skilled workforce and great potential.”
The deal is expected to complete within eight weeks, assuming the completion of the financing arrangements for LPE and contract agreements with key suppliers are agreed.
Hans Fischer, chief executive of Tata Steel’s European operations, said: “Under these current challenging market conditions in Europe with the soaring levels of imports from China, we are happy that Tata Steel UK and Greybull Capital have entered the final stage of completion of the sale.”
Greybull said it is already searching for a permanent chief executive.
The company helped turn-around the airline operator Monarch, which it bought it in 2014 and last year returned to profit, and recently acquired convenience store chain, My Local, from Morrisons.
Mr Meyohas would not confirm whether Greybull was interested in buying other parts of Tata’s UK assets, such as the Port Talbot plant.
“We are always interested in growth. We would review any opportunities as and when they are presented to us,” he said.
The Business Secretary Sajid Javid said: “The UK and Welsh Governments are working tirelessly to support Tata Steel to reach a deal for Port Talbot and their other sites across the UK.”