It’s either the third or fourth version of the deal but it would seem that OneSteel, Smorgon Steel Group and BlueScope Steel have reached an agreement that will see a rationalisation of the country’s steel making business.
The merger between OneSteel and Smorgon was first proposed back in the middle of last year and it had been through several changes after BlueScope picked up 19.9 per cent of Smorgon in an attempt to buy a seat at the table and frustrate the merger.
The merger between OST and SSX was all but knocked on the head by the competition regulator, the ACCC.
Then OST and SSX proposed a complicated deal: the tubular pipe business would be established as a stand alone joint venture, something that won ACCC approval; then OneSteel would pay around $1.1 billion for steel making assets of Smorgon.
That would leave Smorgon as a very large steel distributor.
The ACCC was expected to rule on this deal later today.
But last night that all changed.
BlueScope says it won’t oppose the merger in return for being able to buy Smorgon’s distribution business, for an enterprise value of $700 million.
BlueScope will now plans conduct due diligence on the distribution business and formalise a sale and purchase agreement. That is expected to take two weeks.
It will also assume the position of acquirer and resupplier of scrap for OneSteel’s Sydney Steel Mill.
In exchange, BlueScope will vote in favour of a scheme of arrangement whereby OneSteel will buy all of Smorgon’s shares for OneSteel shares and possibly some cash.
But before the scheme becomes effective, OneSteel would buy BlueScope’s 19.98 per cent stake in Smorgon for a cash price equivalent to the value payable to Smorgon Steel shareholders under the scheme.
“The parties have a period expected to be approximately two weeks during which time they intend to conduct and finalise due diligence on Smorgon Steel Distribution and also to negotiate and finalise formal agreements for the acquisition,” a joint statement from the three steelmakers said yesterday evening.
“If the parties are unable to reach agreement by the end of that period, or BlueScope is otherwise dissatisfied with the results of its due diligence investigations, the proposal and agreement in principle will terminate.”
If that happens, Smorgon and OneSteel will continue with their alternative transaction announced on December 18, whereby OST will buy all of SSX’s businesses and assets, other than Smorgon Steel Distribution, which will continue as a listed entity.
The latest deal is subject to a number of conditions, including approval from the Australian Competition and Consumer Commission (ACCC).
“Having regard to the new proposal and the agreement in principle, OneSteel and Smorgon Steel have today asked the ACCC to postpone consideration of the new transaction, pending confirmation that BlueScope’s due diligence investigations on Smorgon Steel Distribution are satisfactory and the negotiation and formalisation of legal documentation for the proposal,” the companies said in their joint announcement to the ASX.
