Posco (005490) and Noble Group Ltd. (NOBL), leading a consortium to buy Australian steelmaker Arrium Ltd. (ARI), terminated their A$1.2 billion ($1.25 billion) takeover offer because the target’s board refused to engage.
The consortium, having raised its bid to 88 cents a share from 75 cents, needed to access financial information about Arrium to assess the capital required to improve the company’s steel division. Arrium had net debt of A$2.14 billion as of June 30,
“Without due diligence we can’t value the proposal,” Martin Debelle of Citadel PR, an external spokesman for the consortium, said by phone. “We needed to do due diligence so we could assess what capital was required to de-leverage the business so we could assess what capital was required to improve the steel division. They’re denying us due diligence and they’re refusing to talk to us.”
Arrium earlier today rejected the improved offer from the group, saying the 17 percent higher bid undervalued the company.
The 88 cents-a-share offer is “highly conditional” and involved “significant transaction risk” as the group needs to hold talks with Arrium’s lenders, the Sydney-based company, previously known as OneSteel Ltd., said today in a statement. The company rejected the initial 75 cents-a-share bid on Oct. 1.
Buying Arrium would have given Noble and Posco, Asia’s third-biggest steelmaker by output, a potential 9 million metric tons in annual supply of iron ore as well as access to as much as 13 million tons a year of port capacity in South Australia.
Arrium shares fell 1.9 percent to 78.5 cents at the close of trading in Sydney.
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