Australia's OneSteel is planning to spend about $175 million to take over Wellington-based Steel & Tube Holdings.
OneSteel, which already owns 50.27 percent of Steel & Tube, is to offer $4 a share for the rest. This compares with a price of $3 on the market before the offer was announced this morning. The offer values the whole company at $353 million. The offer will be conditional on the Australian company achieving 90 percent acceptance. Also, and most unusually, the bid is conditional on the NZX 50 index not dropping below 2710 for three consecutive days prior to the bid being declared unconditional.
The NZX 50 is comfortably above that level at the moment - trading above 3200 early today. But the inclusion of such a condition demonstrates nervousness about the current global environment.
The bid comes at a time when Steel & Tube's profitability has taken a hit from the economic downturn. Its earnings slipped 19 percent to $22.5 million for the year to June.
The company said that its three Key market segments of construction, manufacturing and the rural sector, all suffered to a varying degree as the combination of exchange rate volatility, high interest rates and reduced growth in consumer spending slowed the economy. These conditions prevented businesses in general from recovering the increased cost of doing business resulting in a margin squeeze.
OneSteel managing director Geoff Plummer said the takeover would allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group.
"OneSteel's proposal confirms its commitment to the New Zealand market and to Steel & Tube’s business, employees, customers and suppliers. If OneSteel's offer proceeds, OneSteel intends to retain the Steel & Tube brand, grow the Steel & Tube business and maintain a quality product offering and high level of service."