“We believe BlueScope’s Australian business is a strong strategic fit for SGH,” Ryan Stokes said in the statement. “We intend to leverage our disciplined operating model and capital allocation approach to deliver better outcomes for stakeholders.”
BlueScope’s North American operations generate almost half of its sales, according to its latest annual report. It owns the North Star steel mill in Ohio, about 125 kilometres from a Steel Dynamics-owned operation, as well as a building products business.
“This transaction is not a surprise — North American steel mills have eyed BlueScope’s North Star mill in Ohio as an attractive asset for a while,” analysts at Citigroup wrote in a note last night. “The challenge was separating the North American assets from the rest of the company.”
Analyst Esther Holloway from Morningstar told this masthead that while SGH’s offer looked good, BlueScope’s board would likely have wanted a higher price per share.
“The offer price is quite a bit better than my fair value estimate. On paper that looks like a very good deal,” she said.
“But the fact that the company [BlueScope] hasn’t rushed to announce the bid gives me an impression that they’re not thrilled.”
The SGH bid has implications for the future of the ailing Whyalla steelworks in South Australia, put into administration last year by its previous owner, billionaire British businessman Sanjeev Gupta, and currently propped up by a $2.4 billion bailout package from the state and federal governments.
Last August, BlueScope joined forces with a consortium of Japanese, Indian and Korean steel companies to launch a bid for Whyalla, and it remains the presumptive frontrunner to acquire the asset off administrators KordaMentha.
It’s too early to say what SGH’s bid means for Whyalla’s future, sources close to the proposed merger said. SGH has previously taken an interest in the steelworks, with Ryan Stokes and chief financial officer Richard Richards visiting the site last year.
Stokes’ bid also comes in the midst of BlueScope’s own planned succession. The steel manufacturers’ chief executive Mark Vassella is retiring after eight years in the job, with his replacement, Tania Archibald, set to commence on February 1.
SGH’s share price rose 4.5 per cent on Tuesday. Steel Dynamics shares dropped as much as 3 per cent in New York overnight.
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