BHP hangs on to NZ steel-maker

By LIBBY MIDDLEBROOK

Australian company Broken Hill Proprietary (BHP) will hang on to its New Zealand steel operation after failing to attract a reasonable price from bidders such as Fletcher Challenge.

BHP opted to retain its 50 per cent stake in Steel and Tube Holdings and integrate the Wellington-based steel manufacturer into a new company to be listed on the Australian Stock Exchange by September.

Last October, BHP said it wanted to sell its Steel and Tube shareholding, prompting an application by Fletcher Challenge Steel to the Commerce Commission seeking clearance to buy the 50 per cent stake.

Fletcher made a bid in December after gaining commission clearance but understood that BHP said no because the price did not reflect its perception of Steel and Tube's market value.

"It's great because we're now going to be part of a company that has a core business very similar to ours," said Nick Calavrias, chief executive of Steel and Tube.

The company will include BHP's Australian steel manufacturer Tubemakers and two Australian-based structural steel mills. Estimated turnover will be $3.6 billion and annual production capacity 1.8 million tonnes of steel. It is understood that BHP shareholders will receive one share in the new steel company for every BHP share owned.

Steel and Tube will remain listed on the New Zealand Stock Exchange with no changes to its operation.

BHP Steel's Australian chief executive, Bob Every, will head the new entity. Mr Every is also chairman of Steel and Tube.

Fletcher Challenge spokesman Barry Akers said the company, which was forced to make two Commerce Commission applications before being cleared, was disappointed that BHP had not accepted its bid for Steel and Tube. Last week, BHP reversed its decision to sell more than $3 billion of non-core steel assets as part of an earlier restructuring programme. The company now plans to decrease the size of its steel assets base from about 30 per cent of its operation to 20 per cent, while boosting its mineral and petroleum divisions.

Ord Minnett broker Arthur Lim said BHP's decision to hold on to Steel and Tube was surprising, given that it had been reviewing its policy on all non-core businesses, "and they simply didn't see Steel and Tube as an integral part of their operation."