A CONSORTIUM seeking to take over steelmaker Arrium has walked away from the proposal, after Arrium said an increased offer from the consortium was still too low and carried with it too many risks.
The consortium, called Steelmakers Australia, said on Wednesday that it was deeply disappointed with the Arrium board's decision not to grant it the opportunity to go through the due diligence process which would allow the consortium to examine Arrium's accounts.
The consortium said it had made a comprehensive proposal that offered a full and fair price.
"Steelmakers Australia has determined it will cease seeking engagement with the Arrium board," Steelmakers said in a statement late on Wednesday.
Steelmakers Australia said Arrium faced significant competitive challenges, and its high financial leverage significantly reduced its options for deploying capital and technology into its steel-making business, which Steelmakers believed was necessary to ensure its long-term future.
Arrium, formerly named OneSteel, received an improved offer of $1.19 billion, or 88 cents per share, from the consortium on Tuesday.
The consortium's original proposal was 75 cents per Arrium share, made at the beginning of October.
The consortium includes Hong Kong commodities trader Noble Group, South Korean steel giant POSCO and several investment and pension funds.
Arrium chairman Peter Smedley had said that the revised proposal significantly undervalued Arrium and was not in the best interests of Arrium shareholders.
"We also believe that the highly conditional nature of the proposal carries significant risk," Mr Smedley had said.
The consortium had needed to meet with Arrium's banks to discuss how it would refinance more than $2 billion in debts, and had also required several weeks to run its eye over Arrium's accounts.
The consortium had provided a letter from Bank of America Merrill Lynch relating to how it would fund a takeover, but Arrium had said the letter contained no specific details and did not constitute a commitment to provide funding.
"The revised proposal is opportunistic," Mr Smedley had said.
"It comes as iron ore prices are rising and after we have shipped the first ore from our new mine two weeks ago.
"Arrium has an attractive portfolio of businesses including a world class mining consumable business and an iron ore business which is performing well and has very attractive growth options.
"The expansion of our mining operations and port remain on track."
The Australian Manufacturing Workers Union (AMWU) on Wednesday called for greater support for the local manufacturing industry, following reports that Arrium will shut its Sunshine, Melbourne, and Perth plants, causing major job losses.
AMWU assistant Victorian state secretary, Leigh Diehm, said the union's No.1 priority was ensuring that all employees received their full entitlements and other benefits.
"Today's announcement of plant closures in Victoria and Western Australia reinforces the need for state and federal governments to provide greater support to local manufacturing industries, for example, through stronger Buy Australian programs.
"Such measures need to be put in place to ensure other local manufacturers do not meet a similar fate to One Steel (Arrium's previous name)."
Arrium shares were 1.5 cents lower at 78.5 cents on Wednesday.
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