Koreans circling Arrium

MINER and steelmaker Arrium has rejected a $A1 billion unsolicited takeover proposal from a mostly Korean consortium due to the low premium and conditions.

Kristie Batten

Arrium said it received the 75c per share cash proposal from the group - which is comprised of the Noble Group, POSCO Australia, the National Pension Service of Korea, the Korea Investment Corporation and the Korea Finance Corporation - after the market closed on Friday.

The company said it met with the consortium and had since reviewed the proposal, coming to the conclusion that it undervalued the company.

The indicative offer price represented a premium of just 8% over the three-month volume weighted average price of Arrium shares, but was a 37.6% premium over Arrium’s closing price of 54.5c on Friday.

The company’s shares have slumped recently, down from highs of around 90c in mid-August.

The proposal also carried conditions; including a six-week due diligence period; the arrangement of debt financing; consortium, regulatory and Arrium board approvals; and exclusivity.

Arrium chairman Peter Smedley said the deal was not in the best interests of its shareholders.

“Arrium has an attractive portfolio of businesses and is poised for significant growth,” he said. “The consortium has indicated they believe they can add a lot of value to each of our key businesses, but this is not reflected in their proposal.”

Smedley added that the proposal came at a time of volatility.

“We continue to have a positive view of the prospects for our businesses and are making significant investments which are expected to deliver increased returns for our shareholders,” he said.

“We have a world-class mining consumable business and an attractive iron ore business – both of which are performing well and growing substantially.

“We have significantly improved the performance of our Australian steel business and we continue to review our steel product portfolio and footprint.”

Arrium’s South Australian iron ore operations are expected to grow from a rate of 6 million tonnes per annum currently to 11Mtpa by the middle of 2013.

The company, formerly known as OneSteel, posted revenue of $7.6 billion for the 2012 financial year.

Arrium shares were unchanged at 54.5c in early trade.