Higher bid for Bluescope likely after board rejects Stokes’ $13bn offer

Billionaire Kerry Stokes’ business conglomerate and its US bidding partner are likely to make another bid for Bluescope, analysts predict, after the steelmaker’s board dismissed the $13 billion offer as “highly opportunistic”.

In a forcefully worded statement on Thursday morning, BlueScope chair Jane McAloon said the offer from Stokes’ SGH Limited and Steel Dynamics was “an attempt to take BlueScope from its shareholders on the cheap”.

“It drastically undervalued our world-class assets, our growth momentum, and our future – and the board will not let that happen,” she said.

Despite this full-throated rejection of Stokes’ charm offensive, analysts and investors did not expect this week’s bid to be the end of SGH’s interest in the steelmaker. “[BlueScope] know how to play this game,” Morningstar equity analyst Esther Holloway said of the board’s rejection.

“This is the first offer that was made. SGH and Steel Dynamics have formed a consortium, they’ve invested time and effort into this. They wouldn’t come through with their best and final offer first.”

John Ayoub, a portfolio manager at BlueScope investor Wilson Asset Management said the steelmaker’s board was right in rejecting an “opportunistic” offer of $30 a share, but agreed that Stokes’ company and their American partners would remain interested.

“We feel it’s still early in the process and don’t expect Steel Dynamics or SGH to go away,” he said. “We would welcome the consortium to engage at levels that appropriately values BSL.”

“Given previous approaches [made by Steel Dynamics] were around $33 in value and considering all the investment BSL has made and the sheer cost of replacing these assets, north of that price would be a better starting point.”

SGH declined to comment further on BlueScope’s rejection of its bid and its future interest in the company. On Wednesday, BlueScope’s largest shareholder, AustralianSuper, increased its stake in the company from 12.5 per cent to 13.52 per cent. The super fund, expected to be a key ally for any successful bid, declined to comment.

Under SGH and Steel Dynamics’ indicative proposal, the value of dividends paid out to BlueScope shareholders until the deal is settled would be taken off the offer. This meant the actual takeover price shareholders would receive would come in below the headline $30-a-share bid, given the time required to implement such a big transaction, BlueScope said.

The suitors approached BlueScope in mid-December with a proposal to buy all of its stock for $30 in cash per share, and then split the company, with SGH acquiring all of BlueScope’s shares and then on-selling its North American businesses to Indiana-based Steel Dynamics. BlueScope’s shares soared more than 20 per cent to $29.48 on Tuesday after the offer was made public. On Thursday, they had fallen 1.74 per cent to $29.35.

The takeover deal was dependent on conditions such as the bidders getting exclusive access to BlueScope’s books and securing significant debt financing, the steelmaker noted.

The Australian steel giant has already rebuffed three previous takeover approaches involving Steel Dynamics since late 2024 as the US steelmaker is eyeing BlueScope’s North American operations.

“This is the fourth time we’ve said no, and the answer remained the same – BlueScope is worth considerably more than what was on the table,” McAloon said in her statement.

She said the offer came at a time of lower steel prices in Asia. If prices picked up again and exchange rates returned to historical levels, this would boost earnings by an additional $400 to $900 million a year from last year’s result, she argued.

Under the latest takeover approach, Stokes’ business conglomerate would add BlueScope’s local and Asia-Pacific operations to its businesses, which include Caterpillar dealer WesTrac, industrial equipment hire company Coates, building products maker Boral as well as part of gas exploration company Beach and television and publishing group Seven West Media. The company is 50.9 per cent owned by the Stokes family, with Kerry’s son, Ryan Stokes, running it as chief executive.

BlueScope’s North American operations generate almost half of its sales, according to its latest annual report. It owns the North Star steel mill in Ohio, about 125 kilometres from a Steel Dynamics-owned operation, as well as a building products business.

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