Steel and Tube shares fall 6.6 percent after parent Arrium sells half-stake

Wednesday 10th October 2012 1 Comment

Shares in Steel & Tube fell 6.6 percent after ASX-listed mining and minerals group, Arrium said it will sell its 50.3 percent stake in the local construction and materials supplier for about $91.2 million.

The stock fell to $2.26 from $2.42. It has gained 17 percent this year and is rated an average 'hold' based on three analyst recommendations compiled by Reuters.

"The way the market has been performing over the last few weeks means it will be well supported by investors as they trace higher dividend yield," said Grant Williamson, director at Hamilton Hindin Greene.

The Australian company, formerly known as OneSteel, appointed an investment bank to underwrite and manage the sale of its Steel & Tube stake at $2.05 a share, it said in a statement. That's a 15 percent discount to the Steel & Tube's closing price yesterday. It expects retail and institutional investors will buy the shares, and will use the cash to cut debt.

Steel & Tube chief executive Dave Taylor said he expects Arrium to remain a key supplier for the firm.

"This is a positive development for Steel & Tube providing greater liquidity in the trading of Steel & Tube shares," Taylor said.

In late 2008 Arrium made a tilt to buy the remaining stake in Steel & Tube, offering $4 a share, but later gave up when it became clear world markets were set to plunge.

This month, Arrium rejected a A$1 billion t bid by an Asian consortium Steelmakers Australia last week, that was led by Hong Kong commodities trader Noble Group and South Korean steel firm POSCO.

Arrium's Steve Hamer has resigned from the Steel & Tube board, effective immediately. Arrium-appointed Dean Pritchard will stay on the board and relinquish the chair to John Anderson.

In August, Steel & Tube reported a 23 percent fall in annual profit to $13.1 million as dwindling demand and stiff competition squeezed margins. Sales rose 5 percent to $405.4 million.

ASX listed Arrium shares last trade at 78.7 Australian cents and have gained 17 percent so far this year.

BusinessDesk.co.nz

Comments from our readers

On 10 October 2012 at 3:27 pm Harry Foodtech said:

I think it's brilliant that New Zealand has sufficient economic strength to allow the repurchase of a quarter of a NZ Based company at short notice. The broker went to the market after the close of business and had covered the deal within 60 minutes, with a third of the shares going to retail investors. This would never have happened 10 years ago. Shows that the money is available for investing in the NZ companies that show good governance and growth prospects.