SGH and Steel Dynamics Issue Final $10.6B BlueScope Offer
Synopsis
BlueScope Steel has been made a A15 billion takeover approach from SGH Ltd, and its US partner, Steel Dynamics. The bidders raised their offer to A32. 35 a share in what they have termed their “best and final” bid for the Australian steel giant. Under the proposed transaction, SGH would acquire Australian operations and Steel Dynamics would acquire North American operations. BlueScope’s board is now considering the offer against their recent strong performance, and shareholders are left to ponder whether or not this mega-merger will proceed.
BlueScope Steel is reviewing a fresh A$15 billion (10.62 billion) best and final takeover approach by SGH and Steel Dynamics. Increased cash offer: A32.35 per share, is seeking to divide the company’s assets in Australia and North America among the two bidders. BlueScope’s board is weighing the deal after several strong years of financial performance and dividends.
Key Highlights
- SGH and Steel Dynamics increased their cash offer to A$15 billion $10.62 billion.
- The new price of A$32.35 a share is 8% more than Engie’s initial, rejected bid.
- Bidders say this is their ‘best and final’ offer to buy Australia’s biggest steelmaker.
- The company’s ownership would be split between Australian and U.S. owners, if the deal goes through.
- The board of BlueScope is currently examining the proposal to determine if it reflects the true value of the company.
A big, new bid for BlueScope
A powerful group of investors has upped the ante in its bid to take over Australia’s premier steelmaker, BlueScope Steel. And $15 billion is on the table from the Australian company SGH, owned by billionaire Kerry Stokes, partnering with its United States-based counterpart Steel Dynamics. This all-cash offer followed a month after the rejection by BlueScope of an inferior proposal, on the basis that there was not enough money. That new price is a huge leap, and the bidders have signalled to musicians around town that they will not be going any higher unless some other competitor attempts to jump in.
Why the company might be broken up
The theory of the multibillion-dollar deal was to split up BlueScope’s global operations. SGH would like to retain the Australian assets of the business, which include the well-known Port Kembla steelworks in New South Wales. And Steel Dynamics wants to acquire the well-performing North American Division of BlueScope. That division has a big plant in Ohio, which is near Steel Dynamics’ own operations. By bifurcating the company in this manner, neither buyer has to take on any parts of the business it doesn’t want in order to help grow its core business.
What investors and analysts are saying
As news of the higher bid broke, BlueScope shares surged 6% as investors bought into the hope of a payout. But the stock is still below the actual offer price, a sign of continuing widespread doubt that this deal will get done. But certain market analysts think the price is still a tad low. They note that BlueScope has been doing well of late, making more money than anticipated and even saying it will hand over extra dividends to its existing shareholders.
This takeover bid comes at a complex time for the steel industry. Global trade rules and new steel import taxes in the United States have made it more difficult for companies to ship goods across those borders. It's vision is to participate in the coronavirus rebuilding programs across Australia and with a U.S. partner build an improved future for the Australian steel industry. BlueScope’s board members are now scrutinising the figures. They must weigh whether selling the company now would benefit shareholders more than remaining independent and continuing to grow on their own.
What happens next for shareholders
For now, the bosses at BlueScope have told their investors that they don’t need to do anything. The board is also scrambling to determine whether the price being offered, A$32.35 per share, really values the company properly. They are also examining how smoothly the deal can be wrapped up and whether there could be any legal obstacles. Should the board say yes, it would be one of Australia’s largest ever corporate acquisitions and mark a new era for local manufacturing.
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