KEY POINTS:
Australian company OneSteel has launched a takeover bid for NZX-listed Steel & Tube.
OneSteel yesterday announced that it intended making a $4 per share cash offer for the remaining 49.73 per cent Steel & Tube it does not already own. The company rejected suggestions the bid was opportunistic.
The offer represents a 33 per cent premium on Steel & Tube's Friday close of $3, and a 17 per cent premium to the volume-weighted average price of Steel & Tube shares traded on the NZX during the month ended September 26. Steel & Tube shares surged on the news to close at $3.80. OneSteel's offer will be funded entirely from existing debt facilities - a move Mark Lister, head of research at ABN Amro Craigs, said could be the beginning of a trend over the coming months.
With the share price of many New Zealand companies sitting near historic lows, Lister said buyers with strong balance sheets could be poised to swoop. But Hamilton Hindin Greene director Grant Williamson's initial impression of OneSteel's offer was that it may not be high enough.
"We could do without any more companies coming off the NZX, but of course, shareholders still have to consider whether they think that price of $4 is enough."
He saw it as an opportunistic offer.
"It's come at a time when values are low. The steel market itself has been extremely volatile in the last several months and it has been difficult for Steel & Tube with local economic activity as well.
"So I think OneSteel have got their timing pretty much spot on in a depressed market, but it's still to be seen whether they will be successful or not."
OneSteel managing director and chief executive Geoff Plummer said the offer represented a significant premium for what was an illiquid stock. It has had its 50 per cent stakeholding since the early 90s, but denied that the offer was an opportunistic move.
"I think that's predicated on an assumption that what we're buying is cheap," said Plummer. "The key thing is if you look at the average price for the last six months, it's been $3 or $3.05. It's also predicated on the assumption that the market's going to rebound and people are going to do a lot better. I think that would be a brave call to make ... I don't see it as opportunistic at all."
He said the offer was significantly higher than the average broker analyst price targets of $3.66 per share and valuations of $3.82 per share.
An independent committee set up by the Steel & Tube board is obtaining an independent adviser's report before making a recommendation to shareholders. Until then, it advises shareholders to wait.
Assuming the board recommends the offer, OneSteel expects to issue the offer document by late October, and to have the takeover concluded before Christmas. If successful, it intends to retain the Steel & Tube brand but delist it from the NZX.
THE PLAYERS
* Steel & Tube is New Zealand's largest distributor of steel and associated products with sales of around $500 million.
* It listed on the New Zealand Stock Exchange in 1967 and ranks among the top 30 companies by market capitalisation.
* ASX-200 company OneSteel is a major manufacturer and distributor of steel products.
* OneSteel already owns 50.27 per cent of Steel & Tube.
THE OFFER
* OneSteel intends to offer $4.00 cash per share for the remaining 49.73 per cent.
* The offer represents a 33 per cent premium on Steel & Tube's Friday close of $3.00, and a 17 per cent premium to the volume-weighted average price of Steel & Tube shares traded on the NZX during the month ended September 26.
