BlueScope board rejects takeover bid

The board of Australia-based steel company BlueScope unanimously has rejected the unsolicited takeover proposal SGH Ltd. and Steel Dynamics Inc. (SDI) submitted in December of last year at a value of AU$30 ($20) per share, saying the proposal significantly undervalued BlueScope.

According to the proposal, Australia-based SGH would have acquired all of BSL's shares and then sold BlueScope's North American businesses to SDI, which is headquartered in Fort Wayne, Indiana, and operates a number of electric arc furnace steel mills in the U.S. as well as a network of scrapyards largely through its OmniSource LLC division.

BlueScope says the offer was less than the value of the company’s future dividend payments. “Given the time required to implement any takeover of BlueScope, the effective value of the proposal for BlueScope shareholders would be less than [AU]$30 per share, with all upside value for the sole benefit of the consortium.”

“Let me be clear—this proposal was an attempt to take BlueScope from its shareholders on the cheap,” says BlueScope Chair Jane McAloon. “It drastically undervalued our world-class assets, our growth momentum and our future—and the board will not let that happen.

"This is the fourth time we've said no, and the answer remained the same—BlueScope is worth considerably more than what was on the table,” she adds.

McAloon says that since BlueScope completed a restructuring in its 2017 financial year, the company has invested more than AU$3.7 billion in growth projects, delivered more than AU$3.8 billion of shareholder returns and achieved an 18 percent average return on invested capital.

Tania Archibald, who currently serves as chief executive of BlueScope’s Australian Steel Products business, will become the company’s new managing director and CEO Feb. 1. Under her leadership, McAloon says, “the board is highly confident that management will continue to deliver superior shareholder value.”

The consortium’s takeover proposal failed to adequately recognise the value of BlueScope’s assets and comes at a time of lower steel spreads in Asia. If steel spreads and exhange rates revert to historical average levels, this would be expected to generate an additional $400 to $900 million of EBIT per annum relative to FY2025.

According to BlueScope, the takeover proposal also fails to reflect the value expected to be delivered from various initiatives, including the targeted $500 million per year in earnings uplift from growth initiatives and investments well underway, ongoing business improvement initiatives and the monetization of BlueScope's 1,200-hectare land portfolio, now being rezoned and developed. It also fails to appropriately value the synergies and other benefits available to the consortium.

“Further, given the consortium are seeking to debt-fund the takeover, and BlueScope had virtually no net debt at FY2025, the bidders are seeking to use BlueScope’s balance sheet to help fund their opportunistic takeover proposal,” BlueScope says.