By Soraya Permatasari - Oct 1, 2012
Bloomberg
Arrium Ltd. (ARI), the Australian iron ore producer previously known as OneSteel Ltd., rejected a A$1.01 billion ($1.05 billion) bid led by Noble Group Ltd. (NOBL) and Posco (005490) Australia Pty., saying it was too low and conditional.
The consortium that also includes National Pension Service of Korea, Korea Investment Corp. and Korea Finance Corp. offered to acquire Arrium in cash for 75 Australian cents a share, 8 percent higher than its three-month average stock price, the Sydney-based target said today in a statement.
The bid came after Arrium shares plunged 22 percent this year as iron ore prices declined 25 percent on concern over slowing demand from China, the top consumer. Buying Arrium would give Noble, Asia’s largest publicly-traded commodity supplier, and other bidders businesses including iron ore mines and steel recycling and manufacturing in Australia.
“Their iron ore unit is the main point of interest,” Stan Shamu, market strategist at IG Markets in Melbourne, said by phone. “Steel has been one of the underperforming businesses for a while.”
Arrium climbed as much as 29 percent to 70.5 cents in Sydney trading, poised for its biggest gain on record. It traded up 25 percent at 68 cents at 11:27 a.m. local time.
Double Output
Arrium plans to almost double iron ore output to 11 million metric tons after June 2013 from its mines in South Australia, the company said in February. Iron ore accounted for more than half its earnings before interest, tax, depreciation and amortization in the year ended June 30, according to data complied by Bloomberg. Full-year net income fell to A$58 million from A$230 million a year earlier, the data shows.
“The proposal was stated to be conditional, incomplete and non-binding,” Arrium said in today’s statement. “Arrium’s board and its advisers have carefully reviewed the proposal. The board believes that the proposal undervalues Arrium in the context of a change of control transaction.”
UBS AG is Arrium’s financial adviser and Allens Linklaters is its legal adviser, Arrium said.
The company changed its name to Arrium from OneSteel in July as it shifts focus to iron ore production from steelmaking. The company still owns steel manufacturing, distribution and recycling units mainly in Whyalla, South Australia.
Debt Profile
Twenty-seven global takeovers of iron and steel companies announced in the past five years, valued the targets at 9.8 times earnings before interest, depreciation, taxes and amortization, data compiled by Bloomberg show.
At 75 cents a share, Arrium would have an enterprise value of A$3.2 billion, or 5.5 times its earnings before interest, tax, depreciation and amortization of A$581 million in the year through June, the data shows.
“The transaction may, depending on how it is finally structured, be subject to conditions, including but not limited to, satisfactory arrangements with lenders with respect to Arrium’s debt profile on a change of control,” Hong Kong-based Noble said in a separate statement.
Arrium has A$2.78 billion of total debt, according to data compiled by Bloomberg.
Bloomberg
Arrium Ltd. (ARI), the Australian iron ore producer previously known as OneSteel Ltd., rejected a A$1.01 billion ($1.05 billion) bid led by Noble Group Ltd. (NOBL) and Posco (005490) Australia Pty., saying it was too low and conditional.
The consortium that also includes National Pension Service of Korea, Korea Investment Corp. and Korea Finance Corp. offered to acquire Arrium in cash for 75 Australian cents a share, 8 percent higher than its three-month average stock price, the Sydney-based target said today in a statement.
The bid came after Arrium shares plunged 22 percent this year as iron ore prices declined 25 percent on concern over slowing demand from China, the top consumer. Buying Arrium would give Noble, Asia’s largest publicly-traded commodity supplier, and other bidders businesses including iron ore mines and steel recycling and manufacturing in Australia.
“Their iron ore unit is the main point of interest,” Stan Shamu, market strategist at IG Markets in Melbourne, said by phone. “Steel has been one of the underperforming businesses for a while.”
Arrium climbed as much as 29 percent to 70.5 cents in Sydney trading, poised for its biggest gain on record. It traded up 25 percent at 68 cents at 11:27 a.m. local time.
Double Output
Arrium plans to almost double iron ore output to 11 million metric tons after June 2013 from its mines in South Australia, the company said in February. Iron ore accounted for more than half its earnings before interest, tax, depreciation and amortization in the year ended June 30, according to data complied by Bloomberg. Full-year net income fell to A$58 million from A$230 million a year earlier, the data shows.
“The proposal was stated to be conditional, incomplete and non-binding,” Arrium said in today’s statement. “Arrium’s board and its advisers have carefully reviewed the proposal. The board believes that the proposal undervalues Arrium in the context of a change of control transaction.”
UBS AG is Arrium’s financial adviser and Allens Linklaters is its legal adviser, Arrium said.
The company changed its name to Arrium from OneSteel in July as it shifts focus to iron ore production from steelmaking. The company still owns steel manufacturing, distribution and recycling units mainly in Whyalla, South Australia.
Debt Profile
Twenty-seven global takeovers of iron and steel companies announced in the past five years, valued the targets at 9.8 times earnings before interest, depreciation, taxes and amortization, data compiled by Bloomberg show.
At 75 cents a share, Arrium would have an enterprise value of A$3.2 billion, or 5.5 times its earnings before interest, tax, depreciation and amortization of A$581 million in the year through June, the data shows.
“The transaction may, depending on how it is finally structured, be subject to conditions, including but not limited to, satisfactory arrangements with lenders with respect to Arrium’s debt profile on a change of control,” Hong Kong-based Noble said in a separate statement.
Arrium has A$2.78 billion of total debt, according to data compiled by Bloomberg.
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