where are regulators, page-15

Major shareholders back Arrium's strategy
by: Matt Chambers

MAJOR shareholders have backed Arrium's decision not to engage with a $1 billion conditional cash bid lobbed last week by a consortium led by steelmaker Posco and trader Noble Group.
The substantial shareholders -- Government of Singapore Investor Corporation and Dimensional Fund Advisors, which together own 11 per cent of the company -- have been publicly silent, but it is understood they have told Arrium they back the board's view that 75c a share is not a price to engage at.

"We have got the very strong support of all of the major shareholders over this," said a source close to Arrium, a steelmaker and miner that recently changed its name from OneSteel.

The bidding consortium, which calls itself Steelmakers Australia and comprises South Korea's Posco, Hong Kong's Noble and three South Korean investment funds, approached Arrium on Friday.

After meeting the consortium, the Sydney-based target released a statement on Monday saying the offer was opportunistic, overly conditional and undervalued the company.

...While Steelmakers Australia has stressed its ability to make Arrium's struggling Whyalla steelworks more competitive, the Arrium camp believes its iron ore exports and recently acquired global grinding media business, which makes disposable steel balls to break rocks in mining mills, are the main focus of the tilt.

Arrium's South Australian iron ore mine expansions will come into focus today and tomorrow when chief executive Geoff Plummer takes analysts and investors on a site tour.

The tour was planned before the surprise bid but will give the Arrium chief the opportunity to promote his assets to the market and explain why 75c a share is not enough, despite a vastly changed iron ore price outlook in the past three months.

Iron ore prices, which were the main reason Arrium's shares were trading at an all-time low of 50c just three weeks ago, will play a big part in any determination of future bidding prices.

After slipping as low as $US86.70 a tonne at about the same time that Arrium shares hit their low, iron ore prices have steadied at just more than $US100 a tonne. However, they are still a long way from the $US130 reached just three months ago.

The Steelmakers Australia bid was at a 38 per cent premium to Arrium's closing price on Friday but an 8 per cent premium to Arrium's three-month weighted average before the bid.

Arrium shares finished flat yesterday at 71.5c.

Despite the bid being seen as an opening gambit, Steelmakers Australia is doing all it can to appear in no hurry to rush in with a better-priced offer. Its argument is that rather than being opportunistic, its bid price is a reflection of a new iron ore reality following slowing growth in China, and that any price rise should be decided after it does due diligence.