BlueScope Rejects ‘Best and Final’ SGH/SDI Offer, But Is Open to Another; Clarity Sought for Ohio’s North Star and Other NA Assets
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In an early-Thursday letter to both Ryan Stokes, managing director and CEO of SGH Limited and Mark Millett, chairman and CEO of Steel Dynamics, Inc (SDI), BlueScope Ltd (BSL) Chair Jane McAloon wrote: “The Revised Proposal does not adequately address our valuation concerns,” but the door was left open. A key sticking point concerns valuation specificity around the on-sale to SDI of BSL’s North American operations, the centerpiece of which is Ohio-based North Star BlueScope Steel—a key supplier of hot-rolled coil.
McAloon noted further: that the latest offer price “is not sufficient for the Board to recommend a scheme of arrangement to its shareholders. Notwithstanding your ‘best and final’ statement, we consider that there are various ways to increase the value that BlueScope shareholders could receive. The Board remains open to a transaction at a price that reflects the fair value of BlueScope.”
On February 17, SGH and SDI made an all-cash offer of A$32.35 per share (A$34 before dividend deductions), which valued BLS at about US$11 billion. This offer followed a A$30 per share on December 12 by SGH/SDI, McAloon said in the letter, also reminding Stokes and Millett that “the Board previously rejected a proposal from SDI, in which SDI stated an implied value of A$33 per share for BlueScope.”
The BSL chair contends in the letter that the revised proposal is not clear on whether the proposed acquisition of BlueScope by SGH is conditional on the on-sale of BlueScope’s North American operations to SDI. “This would have a material impact on the expected timeframe and execution risks associated with transaction completion,”
McAloon wrote, adding, “Accordingly, the Board requests that you clarify whether the conditions of the on-sale of BlueScope’s North America operations by SGH to SDI are also conditions of the proposed scheme of arrangement to be put to BlueScope’s shareholders. The terms and conditions of the on-sale are material to the Board’s assessment of your Revised Proposal.”
McAloon said she had, on two phone calls, previously requested the consortium’s value attribution between BlueScope’s North American operations and its Rest of World operations. “On both occasions, you have declined to provide this information,” she wrote, explaining, “We consider this information to be of significant importance to both the Board and BlueScope shareholders in assessing your proposal to acquire BlueScope for two reasons.”
First, according to McAloon, is a need to disclose the on-sale price for BlueScope’s North American operations “so that the market is efficient, competitive and informed, as required by the legislation.”
She asks: “For example, when would a separate proposal to acquire BlueScope’s North American operations for a particular specified price be ‘superior’? Without knowing the value SDI currently attributes to BlueScope’s North American operations, neither the Board nor the BlueScope shareholders can objectively determine how the exception to the ‘best and final’ statement operates and therefore appraise the ability or possibility of SGH and SDI increasing the offer price under the Revised Proposal.”
Secondly, McAloon maintains that “it is evident that an on-sale price has been agreed. This will need to be disclosed to all of our respective shareholders including to BlueScope’s shareholders as part of the scheme of arrangement documentation if the transaction proceeds.”
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