BlueScope Steel rejects $9B takeover bid, says offer undervalues company

Australian steelmaker BlueScope Steel has rejected a A$13.2 billion ($8.9 billion) takeover offer from SGH and U.S.-based Steel Dynamics, accusing the bidders of attempting to acquire the company “on the cheap,” the company said on Wednesday.

BlueScope shares closed 1.12% higher at A$29.87, just below the A$30-per-share offer that was disclosed earlier this week. Despite the market pricing shares close to the bid level, BlueScope’s board said the proposal “very significantly” undervalued the company.

“This is the fourth time we’ve said no, and the answer remains the same — BlueScope is worth considerably more than what was on the table,” Chair Jane McAloon said in a statement.

According to BlueScope, the offer would be adjusted for future dividend payments and could take a long time to complete, effectively reducing its value. The company also raised concerns about the deal’s financing structure, noting that while BlueScope had virtually no net debt last year, the bid relied heavily on borrowing.

“The bidders are seeking to use BlueScope’s balance sheet to help fund their opportunistic takeover proposal,” the company said.

Under the proposed deal structure, SGH, controlled by Australian billionaire Kerry Stokes, would acquire BlueScope and then sell the steelmaker’s North American assets to Steel Dynamics.

While the share price suggests some investors believe a deal could still go ahead, others say the offer would need to be increased to gain shareholder support.

“It’s good that there’s interest in BlueScope, but based on valuations, it’s not enough,” said Jamie Hannah, deputy head of investments at VanEck, which holds shares in both BlueScope and SGH.

BlueScope’s largest shareholder, AustralianSuper, which owns 12.5% of the company, declined to comment. Its position could prove decisive, as Australian pension funds often play a key role in major corporate transactions.