* Arrium rejects bid, calling it undervalued and conditional
* Bidding group urges Arrium board to continue discussions
* Arrium shares soar as much as 29 percent to one-month high
* Follows others aiming to cash in on low valuations of
(Adds comments from Noble, POSCO group)
By Narayanan Somasundaram and Victoria Thieberger
SYDNEY/MELBOURNE, Oct 1 A consortium including
Noble Group and POSCO urged Arrium
directors to continue discussions on Monday after the
Australian miner and steel maker rejected a A$1.01 billion
($1.04 billion) takeover offer.
Arrium's shares jumped as much as 29 percent to a one-month
high as investors anticipated the company would remain in play.
The bidding consortium, Steelmakers Australia, issued a
statement later on Monday, urging Arrium to continue
negotiations but gave no indication it might raise the bid.
"Steelmakers Australia remains interested in working with
the Arrium board to develop the proposal into an agreed
transaction that can be presented to Arrium shareholders, but
requires engagement from the board in order to achieve this
outcome," it said.
The consortium, which also includes National Pension Service
of Korea, Korea Investment Corp and Korea Finance Corp, offered
75 cents a share, or a 37.6 percent premium to Arrium's close on
Friday. Arrium's shares traded above A$0.75 as recently as Aug.
The consortium joins a string of firms aiming to cash in on
a drop in the value of resource firms due to tumbling
commodities prices. Its bid comes just weeks after Arrium
produced its first iron ore from its expanded production.
"There has been a lot of consolidation in the global steel
industry for a long time. This is a further working through of
the globalisation of the industry," said Richard Morrow,
director at E.L. & C. Baillieu Stockbroking in Melbourne.
The bid propelled larger rival BlueScope Ltd's
shares up as much as 8 percent on Monday on hopes of further
consolidation in the sector.
Arrium shares had fallen by over a fifth this year to
Friday's close. A s of 0730 GMT, its shares were trading up 24.77
percent at A$0.68 while the broader market was flat.
LEAN YEAR FOR MINERS
A shake-out from sliding iron ore and coal prices has
touched off a spate of asset sales as tough times spread from
Australia to Indonesia in what has been a lean year in the
Iron ore prices, while recovering from a low of $86 a tonne,
remain nearly a third below this year's high of $150 a tonne as
Chinese demand cools. That rattled share prices and forced
miners including BHP Billiton to delay some expansion.
Asia-Pacific mining deals so far this year total $47.6
billion, down 23 percent from a year earlier, Thomson Reuters
data shows, but signs of a revival in appetite were evident as
near record-low valuations spur deals.
Cashed-up Japanese, Korean and Chinese buyers are
cherry-picking mining assets, investment bankers and lawyers
Activity has picked up in recent weeks, led by a $960
million bid by Thai state-controlled energy company PTT
to privatise coal miner Sakari Resources.
POSCO and others are in talks to buy a 20 percent stake in
PT Borneo, which aims to reduce $1 billion in debt
incurred last year when it bought a stake in London-listed Bumi
BID "UNDERVALUES ARRIUM"
"We believe that the proposal undervalues Arrium, and is not
in the best interests of Arrium shareholders," Arrium's
chairman, Peter Smedley, said in a statement on Monday.
"We also believe that the highly conditional nature of the
proposal carries significant risk."
The conditional offer represents a premium of 8 percent over
the volume weighted average price of Arrium's shares during the
last three months, the firm said in a statement.
Conditions included a six-week due diligence period,
negotiations with existing lenders, no dividend payment and a
requirement for no material adverse change to Arrium's
operations or capital structure.
In its statement, Steelmakers Australia said it was
disappointed by Arrium's decision to reject the bid, saying the
proposal would deliver "a certain cash outcome for Arrium
shareholders at a time when a great deal of uncertainty
surrounds Arrium's businesses."
"By using the proven expertise of POSCO in steelmaking
supported by Noble's global supply-chain management skills, we
can make the Arrium business more efficient and globally
competitive", Steelmakers Australia director William Randall
Arrium plans to raise iron ore capacity to 11 million tonnes
a year by mid-2013 from 6 million tonnes now. It posted an
underlying net profit of A$195 million on sales of A$7.6 billion
in 2011/12 and had net debt of A$2.14 billion.
The bulk of its sales comes from steel and mining
consumables, with iron ore mining contributing just A$819
million to revenue in 2011/12, filings showed.
The company earlier this year changed its name from One
Steel Ltd to reflect its shift towards a diversified global
mining and materials business and to attract new investors.
Arrium has retained UBS as its financial adviser
and Allens Linklaters as its legal adviser. The bidding
consortium is being advised by Bank of America Merrill Lynch
, according to two people familiar with the bid.
($1 = 0.9616 Australian dollars)
(Additional reporting by Rebekah Kebede in PERTH; Editing by Ed
Davies and Ken Wills)