Fletcher's cleared to sell Pacific Steel for $120m

A steel chimney at the Pacific Steel Group plant in Otahuhu, Auckland. Photo / Brett Phibbs

BlueScope Steel, Australia's largest steelmaker and owner of the New Zealand Steel mill, has gained antitrust approval to acquire the assets of Fletcher Building's Pacific Steel in a $120 million deal.

The Commerce Commission said while the acquisition will leave BlueScope as the only New Zealand producer of flat steel products such as steel slab and sheeting, and long steel products such as billet, reinforcing bar and wire there wasn't an overlap between the two businesses and prices would continue to be influence by imported product.

"The products supplied by BlueScope and Pacific Steel can be sourced through imports and the import price strongly influences the prices that BlueScope and Pacific Steel are able to charge," commission chairman Mark Berry said in a statement. "Post-merger, imports will continue to provide pricing pressure on the merged business."

The companies are aiming to complete the transaction by the middle of the year. As a result, Fletcher plans to close its steel mill at Otahuhu at the end of 2015.

Melbourne-based BlueScope will pay $60 million for Pacific Steel's long-products rolling and marketing operations and pay about $60 million for the target's working capital, Fletcher said in February. The Auckland-based company expects a one-time net expense of about $19 million as a result.

Bluescope will pay half the $60 million price of the assets upfront and the remainder once it has commissioned a new billet caster, expected to be by the end of calendar 2015.

The Australian company will build the billet caster at the Glenbrook mill south of Auckland operated by its NZ Steel unit, spending about $50 million on the new plant.

Until then, Fletcher will continue to operate the Otahuhu mill and supply BlueScope with billet on commercial terms, it said in February.

The sale includes Pacific Steel's rolling mill and wire drawing facilities at Otahuhu and its Fijian rolling mill. Once Bluescope's billet caster is running, NZ Steel will supply billet to the rolling mills at Otahuhu and in Fiji.

Fletcher shares were last at $9.60 and have gained 13 percent this year. Bluescope was last at A$6.35 on the ASX and are up 9 percent this year.