KKR, Carlyle Group eye Arrium play

This article first appeared in The Australian Business Review.

Expect a line-up of global private equity heavyweights to enter the contest for Arrium’s Moly-Cop grinding media business.
While a sales process through Lazard and UBS is yet to begin, it is believed that Kohlberg Kravis Roberts and Carlyle Group — a private equity firm eager to expand its exposure to Australia — are shaping up as likely competitors for the business, along with Pacific Equity Partners, which is seen as an obvious party to take a look. Arrium has been viewed as overgeared for some time and selling part of the business or the entire entity could offer a much needed cash injection.
Arrium purchased Moly-Cop from Anglo American in 2010 for $US930m, some potential bidders have indicated that the price they are prepared to pay for the division is likely to be far less.
Much of Moly-Cop’s success rests on the potential future threat of Chinese competitors in the area of grinding media.
Arrium’s mining consumables division, which includes Moly-Cop, has been growing strongly, but its steel operation is facing challenging conditions and mining is suffering from iron ore prices reaching five-year lows.

Meanwhile, BlueScope Steel is worth watching in the context of a potential takeover of Arrium as a whole.
The steel producer has considered an acquisition of Arrium before and is viewed a logical buyer. Some in the market view BlueScope as being in need of making a radical move to ensure it remains a healthy market participant.