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OneSteel Lodges Notice of Intention to Make Cash Offer for Steel & Tube
09/30/2008 - OneSteel NZ Holdings gives notice of its intention to make a cash offer for all of the shares in Steel & Tube Holdings Limited that it does not already own.
OneSteel Limited subsidiary OneSteel NZ Holdings Limited has given notice to Steel & Tube Holdings Limited of its intention to make a cash offer for all of the shares in Steel & Tube that it does not already own. OneSteel, the largest shareholder in Steel & Tube, currently owns 50.27% of the shares on issue.
OneSteel says it will fund its offer, which has an offer price of NZ$4.00 cash per Steel & Tube share, entirely from existing debt facilities. The offer price represents a 33% premium to the last price of Steel & Tube shares traded on NZX on September 26, 2008 (the last trading date prior to this announcement)1. It also represents a 17% premium to the volume-weighted average price of Steel & Tube shares traded on NZX during the month ended on September 26, 2008; and a 31% premium to the volume-weighted average price of Steel & Tube shares traded on NZX during the 3 months ended on September 26, 2008.
"If OneSteel's offer proceeds, Steel & Tube shareholders will have the opportunity to sell their shares for cash at a significant premium,” stated Peter Smedley, OneSteel Limited's Chairman. “The opportunity for all Steel & Tube shareholders to be able to receive cash is attractive given the illiquid market for Steel & Tube shares and the current economic uncertainty and market volatility."
OneSteel is seeking a unanimous recommendation from the Steel & Tube Board, in the absence of a superior proposal.
The Steel & Tube Board has indicated that before making a formal recommendation to Steel & Tube shareholders, it intends to obtain an Independent Adviser’s report regarding the offer. Consequently, OneSteel has lodged a takeover notice, which will facilitate Steel & Tube’s appointment of an Independent Adviser that is approved by the New Zealand Takeovers Panel.
OneSteel noted that the offer price is significantly higher than the average of broker analyst price targets (NZ$3.66 per share2) and broker analyst valuations (NZ$3.82 per share3). The price also values Steel & Tube at an enterprise value of NZ$437.9 million.
“If OneSteel's offer proceeds, it will allow OneSteel to simplify its corporate structure and efficiently manage the Steel & Tube business as part of the OneSteel group,” said Geoff Plummer, OneSteel Limited's Managing Director and CEO. “OneSteel's proposal confirms its commitment to the New Zealand market and to Steel & Tube’s business, employees, customers and suppliers. If OneSteel's offer proceeds, OneSteel intends to retain the Steel & Tube brand, grow the Steel & Tube business and maintain a quality product offering and high level of service.”
Based on the offer price of NZ$4.00 per share and excluding transaction costs, OneSteel expects the transaction to be EPS accretive in the first full year following its completion of the transaction and thereafter.
The offer is subject to limited conditions, including OneSteel receiving sufficient acceptances to increase its shareholding in Steel & Tube to at least 90%, Overseas Investment Office approval, and the NZX50 does not close below 2,710 on three consecutive trading days through the end of the period by which the offer must become unconditional.
1) Steel and Tube closing share price on September 26, 2008 was NZ$3.00.
2) Average of price targets published by 7 brokers—ABN AMRO, Citi, Credit Suisse, Forsyth Barr, Goldman Sachs JBWere, Macquarie and UBS—from reports published post August 14, 2008.
3) Average of valuations published by 7 brokers—ABN AMRO, Citi, Credit Suisse, Forsyth Barr, Goldman Sachs JBWere, Macquarie and UBS—from reports published post August 14, 2008.
