During SDI’s fourth-quarter earnings call on Monday, Millett addressed SDI’s recent proposal to acquire the business — and BlueScope’s subsequent rejection — arguing that the offer is fair and that SDI is in a better position to maximize the operation.

“Our actions are intentional and strategic, not opportunistic. We pay fair value for good businesses that enhance value for all constituents,” Millett said during the call. “The offer is compelling, reflecting the value of BlueScope's business appropriately, and is significantly higher than the value its shares have ever realized in over 15 years. The deal construct is simple and straightforward,” he added.

Through an unsolicited and nonbinding offer, SDI and a partner, Australia-based SGH Ltd., proposed to buy BlueScope for AU$30/share. Under their plan, SGH would buy BlueScope outright, and then sell its North American business to SDI.

BlueScope’s board, however, rejected the offer on grounds that it does not reflect the company’s true value.
Millett, however, said that BlueScope’s lone North American steel mill, while a quality asset, is a commodity-focused, flat-rolled mill lacking processing capabilities that would help it fend off competition from new domestic capacity.

Moreover, the mill, as it currently is, can’t provide BlueScope’s geographically disparate coil coating operations in North America with the necessary value-added substrate, he said. 

“Product diversification is critical for it to sustain earnings power, and imperative for the desired value creation within their acquired coating business,” Millett said. “The scale, supply chains and business model of SDI would provide immediate resolution.”