BlueScope Bought 15.8% Stake in Steel & Tube: A Quick Look

BlueScope Steel Limited (ASX: BSL) managed to buy 15.8% stake in Steel & Tube Holdings which is based in New Zealand. On the company in which BlueScope bought a stake, Fletcher Building withdrew the $288 million takeover recently. As per the top management of BlueScope, New Zealand Steel has made this acquisition of 15.8% in the company stated. New Zealand Steel is the subsidiary of BlueScope Limited (wholly-owned). The company has decided to make the stake purchase from Milford Asset Management which is based in New Zealand. BlueScope stated that the acquired company is a client of its subsidiary i.e. New Zealand Steel. Both the companies, New Zealand Steel as well as BlueScope, would not be coming out with the takeover offer in respect to Steel & Tube.

However, the bid of Fletcher Building was pulled out by the chief executive officer or CEO. He took back the bid amounting to $NZ315 million. The top management of Fletcher was frustrated on go-slow tactics of Steel & Tube. Recently, the chairman of Steel & Tube came forward and sent the letter addressing the shareholders. The letter stated the reasons in detail which has led Fletcher to withdraw the bid. This letter was sent on October 15. However, unexpectedly, Fletcher Building made an announcement later that it would be withdrawing its decision to acquire Steel & Tube.Â

However, the top management of Fletcher stated that it withdrew this revised offer and, according to them, it was very attractive. On the other hand, the management of Steel & Tube had a completely different opinion. It stated that the offer was very low. Actually, its corporate adviser First NZ Capital stated that the company’s intrinsic value has to be in the range of $NZ1.95-$NZ2.36 per share and this also excludes the share of synergies.

The management of Fletcher has plans to reposition the group as building products and the management is working to reduce the exposure with respect to New Zealand’s commercial construction sector. This decision comes because it has experienced cost blowout crisis because of the earlier management. Of the total revenues of $NZ9.5 billion, Fletcher has garnered 30% with the help of the Australian operations. The company also has plans to unload Formica laminates business which is in the US.

BlueScope stated that its capital expenditure principles revolves around making the investments so that favorable momentum in the premium branded products can be achieved, making deployments towards technology, customer as well as innovation and making investments to generate value from the best in class assets. In FY 2018, the company recorded sales revenues amounting to $11.4 billion from the continuing operations which reflects the YoY growth of 9%. However, it also witnessed the favorable momentum in the underlying EBITDA (earnings before interest, tax, depreciation and amortization) on the YoY basis.

On October 17, 2018, BlueScope Steel Limited ended the day at A$15.200 per share which reflects a fall of -0.530 or 3.369%. The company’s market capitalization stood at $8.53 billion.

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