Asian investors bid $1 billion to buy Whyalla's Arrium steelworks
THE foreign group that wants to buy Australian steel company Arrium for $1 billion says its production method could secure the future of Whyalla's steelworks.
THE foreign group that wants to buy Australian steel company Arrium for $1 billion says its production method could secure the future of Whyalla's steelworks.
A consortium of Asian-based investors yesterday made a $1 billion bid to buy Arrium (formerly OneSteel), which owns the Whyalla steelworks and iron ore mines in the Middleback Ranges.
Arrium has rebuffed the bid, saying it is too low and does not reflect the value of the business, which it has been investing in heavily.
The Asian consortium, which is calling itself Steelmakers Australia, wants access to the Whyalla blast furnace and steelworks to see whether it is suited to its Finex steel making process.
The consortium includes South Korean company POSCO, one of the world's biggest steel makers.
POSCO has been working on Finex for 20 years and built its first commercial plant in 2007. The company says the process cuts operating costs by 15 per cent and also eliminates virtually all nitrogen and sulphur oxide gases and 72 per cent of dust.
Steel making in Australia has suffered because of the high Australian dollar. The future of the Whyalla operations has been the subject of much speculation.
Steelmakers Australia director William Randall said the consortium believed it could develop the Arrium businesses over the long term.
"Steelmakers Australia can make Arrium a more competitive steel producer by improving production processes," he said.
"By using the proven expertise of POSCO in steel making supported by Noble's global supply-chain management skills, we can make the Arrium business more efficient and globally competitive."
Arrium has completed a $400 million upgrade at Whyalla, which will increase its iron ore exports to 11 million tonnes.
While it has been cutting jobs in steel making nationwide, Arrium announced in February that another 450 mining jobs would be created at Whyalla by the time the expansion was finished. It now employs 3000 people across the mining and steel businesses in the city.
Arrium's board said yesterday the 75c-a-share bid was too low, and analysts believe the Asian consortium is trying to take advantage of low iron ore prices to take control of the company.
Macquarie Equities and Credit Suisse both value the company at $1.15 a share. The Arrium board said the 75c-a-share price was just 8 per cent above its average share price for the past three months and undervalued the company.
Chairman Peter Smedley said in a statement that the bid was not in the best interests of shareholders.
Another benefit for POSCO would be access to Arrium's Australian steel distribution business.
Mineral Resources Minister Tom Koutsantonis said the SA Government supported investment in Whyalla and the Upper Spencer Gulf.
"The interest shown by an overseas investor highlights the economic potential of the Upper Spencer Gulf region," he said.
"Like the Arrium shareholders, we will be looking closely at what is being proposed by POSCO and how it relates to the integrated mining and steel making operation at Whyalla."
The Asian bid would need approval from the Foreign Investment Review Board to go through.
Arrium shares closed at 68c yesterday, up 24.8 per cent.
THE BIDDERS
POSCO: One of the largest steelmakers in the world, based in South Korea.
Noble Group: Hong Kong-based commodities trading company.
Korea Finance Corporation: A sovereign wealth fund providing finance and support for sectors of economic significance to the country.
Korea Investment Corporation: A sovereign wealth fund that manages some of Korea's foreign reserves.
The National Pension Service of Korea: The largest investor in South Korea and one of the world's largest pension funds.