BlueScope in box seat for embattled Whyalla Steelworks saved by taxpayers

The steelmaking giant will have access to rival proposals for the SA facility under a ‘right of last offer’, giving it a significant advantage over competitors.

Whyalla Steelworks in South Australia. Picture: AFP

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BlueScope will have access to rival bids for the Whyalla Steelworks under a “right of last offer”, giving the steelmaking giant a significant advantage over competitors to take control of the embattled facility saved by a $2.4bn taxpayer-funded rescue package.

With more than 30 domestic and international companies expressing interest in buying the steelworks, mine and port, BlueScope has the right to swoop in on Whyalla at the last minute after digesting details from other proposals and matching their offers.

Two weeks after Anthony ­Albanese and South Australian Premier Peter Malinauskas in February announced the $2.4bn package, BlueScope Steel, the ­nation’s biggest steelmaker, was appointed as a “steelmaking ­adviser” to Whyalla Steelworks administrator KordaMentha.

KordaMentha documents seen by The Australian reveal that in return for advisory services, which are unpaid beyond out-of-pocket costs, a “right of last offer” (ROLO) outcome was ­negotiated for BlueScope.

The terms of the ROLO, which have raised concerns among some potential bidders over whether the Whyalla Steelworks process advantages BlueScope, includes five provisions underpinning the independent sale process led by KordaMentha and 333 Capital.

These include that before the administrators or OneSteel enter a third-party proposal or recommend it to creditors, the administrators must give to BlueScope a “full copy of the terms of the third party proposal (to the extent permitted by law)”.

If unable to provide a full copy of the proposal, a summary of material terms and conditions would be supplied.

Anthony Albanese, with workers at Whyalla Steelworks, has promoted BlueScope Steel’s substantial investments in the US. Picture: NewsWire / Tim Joy

BlueScope or a qualifying related entity would be invited to submit its own offer 10 business days after the company received a copy of the third-party proposal.

If the BlueScope offer is “no less favourable … on an overall basis” compared with a competing bid, the company would have its bid accepted and recommended to creditors.

Even if the BlueScope offer is “less favourable to OneSteel and its creditors”, due and careful consideration will be applied to the offer and “business judgment” exercised to determine whether the bid should be preferred over another proposal.

The formal sale process for the Whyalla Steelworks and associated mining operations was launched on June 24, with selected prospective buyers provided access to a “secure data room” that enables initial due diligence and allows bidders to prepare “non-binding indicative offers”.

Mr Malinauskas last month said there had been at least 30 parties interested in buying the steelworks with more than 60 per cent based overseas. Steel companies from Australia, Japan, India and South Korea considered the strongest bidders included JSW, POSCO and BlueScope.

The Australian understands the sale process could take up to 18 months to conclude and that, of the interested parties, only half a dozen are considered genuine contenders to take control of Whyalla Steelworks. The South Australian government appointed KordaMentha after seizing control of Sanjeev Gupta’s steelworks and associated mines in February.

Mr Albanese and SA Premier Peter Malinauskas at Whyalla Steelworks in February. Picture: NewsWire / Tim Joy

Industry Minister Tim Ayres and South Australian Energy and Mining Minister Tom Koutsantonis – whose governments last week announced a further $275m to continue operation of the Whyalla Steelworks and pay wages – have made clear the facility is considered critical for Australia’s future sovereign manufacturing capability.

Of the $2.4bn in shared funding between the federal and state governments, $100m was allocated for immediate on-the-ground support, $384m for stabilising the steelworks and $1.9bn for investing in the steelworks’ future.

Administrator Mark Mentha recently said more than $100m had been spent on major Whyalla steelworks equipment upgrades since February, including relining kilns, fixing the blast furnace, installing traffic lights and replacing conveyor belts.

In March, BlueScope managing director Mark Vassella, whose company is not committing capital or corporate support to the administration process, said: “Our position as an adviser will also help inform our potential participation in any future sale process, noting any decision would be subject to BlueScope’s rigorous capital assessment ­process and return on investment hurdles”.

Under pressure to secure his first in-person meeting with ­Donald Trump, Mr Albanese has promoted BlueScope Steel’s substantial investments in the US, where the company employs about 4500 employees. The Prime Minister has also talked-up Colorbond roof products manufactured and exported by BlueScope.

BlueScope’s North Star steelworks near the town of Delta in rural Ohio.

South Australia is also home to the Osborne naval shipyard, which is being expanded to support the construction of Hunterclass frigates, Arafura-class offshore patrol vessels and AUKUS nuclear submarines in coming years.

As the only other local blast furnace operator, BlueScope was tapped by KordaMentha as an adviser to provide “in-kind ­technical and operational support in an advisory capacity to the ­administrators as they seek to ­secure ongoing operations at the Steelworks”.

A spokeswoman for Mr Ayres said the Albanese government “has no preferred bidder and will not engage preferentially with any bidder”.

“The sale process is independent and being led by KordaMentha and 333 Capital,” the spokeswoman said.

“The terms of any agreements made by the administrators are a matter for them.

“BlueScope was appointed by the independent administrators of the Whyalla Steelworks as a steelmaking adviser. This was deemed necessary by the administrators due to years of underinvestment by GFG.

“The Whyalla Steelworks is a unique pit-to-port asset and a critical pillar of sovereign steelmaking in Australia. We understand that multiple parties have expressed an interest in the sale, and the administrators KordaMentha are running a competitive sales process.”

A spokesman for the Malinauskas government said it had “always emphasised the need to safeguard sovereign steelmaking capacity locally for the long term”.