BlueScope shares fall after rejecting 'significantly undervalued' takeover offer

BlueScope Steel Ltd (ASX: BSL) shares are under pressure on Thursday morning.

At the time of writing, the steel products manufacturer's shares are down 1% to $29.56.

What's going on with BlueScope shares?

Investors have been hitting the sell button today after the company released an update on the takeover approach it received from a consortium comprising SGH Ltd (ASX: SGH) and Steel Dynamics, Inc (NASDAQ: STLD).

The takeover proposal offered to acquire all BlueScope shares by way of a scheme of arrangement at a price of $30.00 cash per share.

According to the release, the BlueScope board has unanimously rejected the unsolicited, non-binding, indicative, and conditional takeover proposal from the consortium.

It notes that the takeover proposal was subject to numerous conditions, including the consortium undertaking extensive due diligence on the company on an exclusive basis and securing significant debt financing.

The board unanimously rejected the takeover proposal on the basis that it "very significantly undervalued BlueScope."

Commenting on the decision, the company's chair, Jane McAloon, didn't hold back. She said:

Let me be clear – this proposal 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. 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.

The BlueScope team is well recognised for driving and delivering value for our shareholders and customers. Since its restructure was completed in financial year 2017, BlueScope has invested over $3.7 billion in growth projects, delivered over $3.8 billion of shareholder returns and achieved an 18% average return on invested capital. Under the experienced leadership of the incoming MD&CEO, Tania Archibald, the Board is highly confident that management will continue to deliver superior shareholder value.

Undervaluing its assets

BlueScope believes the consortium's takeover proposal failed to adequately recognise the value of its assets and comes at a time of lower steel spreads in Asia.

It highlights that if steel spreads and foreign exchange rates reverted to historical average levels, this would be expected to generate an additional $400 million to $900 million of EBIT per annum relative to FY 2025.

The company also points out that the consortium are seeking to debt-fund the takeover, and BlueScope had virtually no net debt at FY 2025. As a result, it feels that the bidders are seeking to use BlueScope's strong balance sheet to help fund their opportunistic takeover proposal.

The post BlueScope shares fall after rejecting 'significantly undervalued' takeover offer appeared first on The Motley Fool Australia.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Steel Dynamics. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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