Australia's BlueScope agrees to revised OneSteel/Smorgon merger

Australia's BlueScope agrees to revised OneSteel/Smorgon merger

	Published : Tue, 20 Mar 2007 07:51 By : Agencies Print this Story

SYDNEY (XFN-ASIA) - BlueScope Steel Ltd said it will support a revised merger between OneSteel Ltd and Smorgon Steel Group Ltd similar to that put forward in a scheme of arrangement between Australia's second and third largest steelmakers last June.

Under the revised structure, Bluescope, which is the largest steel producer, will acquire Smorgon Steel's metal distribution business for an enterprise value of 700 mln aud, and acquire and resupply scrap metal for OneSteel's Sydney steel mill.

BlueScope said it would also support the revised merger on condition that Smorgon proposed a scheme of arrangement with its shareholders (other than OneSteel) by which OneSteel would acquire all of Smorgon's shares in return for OneSteel shares and, possibly, some cash.

Additionally, OneSteel would acquire BlueScope's 19.98 pct stake in Smorgon Steel for a cash price equivalent to the value payable to Smorgon Steel shareholders under the scheme.

In June 2006, OneSteel proposed acquiring all the shares in Smorgon Steel at an implied value of 1.76 aud per share or a total price of about 1.6 bln aud.

OneSteel said it would demerge or sell Smorgon Steel's metal and steel merchandising business in order to reduce the chances of the plan being blocked by the competition regulator, the Australian Competition and Consumer Commission (ACCC).

The ACCC subsequently ruled that the merger would act as a constraint to competition in the domestic steel products market, leading BlueScope to acquire a 19.9 pct stake in Smorgon Steel, effectively blocking OneSteel's plans.

All parties have about two weeks to conduct and finalise due diligence on Smorgon Steel's distribution business and also to negotiate and finalise formal agreements for the acquisition.

BlueScope said if an agreement is not reached then all the proposals and agreements in principle will terminate, while OneSteel and Smorgon said they will continue to pursue the merger proposed on Dec 18, namely the acquisition by OneSteel of all of Smorgon Steel's businesses and assets, other than Smorgon Steel's distribution business.

The new proposal is subject to approval from the ACCC and certain tax rulings.

(1 usd = 1.25 aud)

paul.daniel@xfn.com