Tata has signed an agreement to sell its Speciality Steels business to Liberty House Group for £100 million, the company announced.
The sale could help secure 1,700 jobs at several South Yorkshire sites that make products for the aerospace, automotive and oil and gas industries.
The acquisition by Liberty House Group will make it one of the largest steel and engineering employers in the UK employing more than 4,000 workers.
Sanjeev Gupta, executive chairman of the Liberty House Group said: “I am proud that we are acquiring a world-class business with a very skilled workforce and broad range of high-value products.
"It is one of only a handful of such operations in the world and I am confident it will flourish within our group."
The Liberty House founder, who has already saved a number of plants from closure, said that the business will be part of the company's 'Greensteel' vision using scrap steel for high-value-added products.
"In the very week that Liberty is celebrating its 25th anniversary, I am delighted to welcome many hundreds more members to the Liberty family," he added.
Bimlendra Jha, chief executive of Tata Steel UK said the sale was "good news" and an important step forward in securing future business and a sustainable future for the company's Port Talbot-based supply chain.
"Like our former Scunthorpe-based Long Products business which we sold last year, we will be handing over a business which has been transformed following difficult decisions to restructure and re-focus on higher-value markets," he said.
"Employees, trade unions and the management team have worked incredibly hard at Speciality Steels to improve its performance and I'm delighted to say that the business is now on an improvement track which will enable it to thrive in the future."