British steelmaker and industrial firm Liberty House and its stablemate, SIMEC, have emerged as the buyer of the Arrium assets including the Whyalla steelworks after making a third offer on Tuesday night.
The British duo, bidding under the entity of the GFG Alliance, has signed a binding agreement with administrators KordaMentha to buy the Australian assets of Arrium. It now needs to be approved by the committee of creditors at a meeting next week.
The British duo, which had been an underbidder earlier in the process, lodged a higher bid late on Tuesday night.
KordaMentha’s Mark Mentha said the GFG option was “superior” to the conditional offer from the Korean consortium of Newlake Alliance and JB Asset Management.
Liberty House and SIMEC, trough the GFG Alliance vehicle, are proposing a modernisation of the Whyalla steelworks and a power plant, which also would feed extra electricity back into the fragile South Australian power grid. They have been at the forefront of a partial revitalisation of the British steelmaking industry over the past few years, buying troubled assets and injecting fresh capital into them.
Sanjeev Gupta, the executive chairman of Liberty House, said on Wednesday that it was a landmark deal which would establish the GFG Alliance “as a major participant in Australia’s industrial landscape’.
“We have a vision to create a vertically integrated and sustainable industrial business that encompasses mining, metal recycling, primary metal production, engineering and distribution, and which also includes the use of renewable energy, consistent with our Greensteel strategy,” he said.
Mr Mentha said that the revised offer on Tuesday night was a better outcome when all factors were considered.
“After assessing all factors, including timeframes to complete a sale, the administrators and sale advisers Morgan Stanley, decided the GFG Alliance offer was superior to the conditional offer of the Korean consortium with whom we were negotiating,” Mr Mentha said in a letter to Arrium staff on Wednesday morning.
Arrium has been in administration since April, 2016 after collapsing under debts of $2.8 billion. An exclusivity period which had been signed with the Korean consortium by KordaMentha had expired, allowing the GFG Alliance to make a third offer.
South Australian Premier Jay Weatheriill said he had spoken to Mr Gupta on Wednesday morning to offer his congratulations and to reaffirm the state government’s commitment to the long-term future of the Whyalla operations. The South Australian Government has promised $50 million in cash to a new buyer of the Whyalla steelworks.
GFG Alliance has acquired the Whyalla steelworks, an associated iron ore mine in the nearby Middleback ranges, electric arc furnaces and mini-mills on the eastern seaboard of Australia in Sydney, Melbourne and Newcastle, and a national steel scrap and recycling business which handles about 1.2 million tonnes of ferrous scrap. Mr Gupta said the acquisition of Arrium was expected to secure the jobs of about 5,500 Australian workers.
Liberty House and SIMEC, which was established by Mr Gupta’s father and runs shipping, steelmaking, trading, commodities and energy businesses, have a combined revenue of more than $11 billion annually. Sanjeev Gupta said in December, 2016 on one of his first visits to the Whyalla operations that he couldn’t understand why Australia had never become a powerhouse in the steel industry because it had all the raw materials.
The Korean consortium of Newlake Alliance and JB Asset Management had signed a deal with Korean steelmaker POSCO where it intended to use POSCO’s patented Finex steelmaking technology and also build a 200-megawatt power plant in a combined $US1 billion ($1.32 billion) investment at the Whyalla steelworks. They were anointed as preferred bidders in mid-June. But the British duo then lobbed a second, higher bid a day or so later to try and re-enter the process, but KordaMentha insisted the negotiations were exclusive still. That changed when an exclusivity period expired, allowing the British firms to make a third and higher offer, which was accepted.
POSCO is the world’s fourth-largest steelmaker and had installed three iterations of the Finex technology at its steelworks at Pohang in South Korea.
Australian Workers Union national secretary Daniel Walton, said the GFG Alliance had a strong track record in the United Kingdom for doing the right thing in the corporate world.
The AWU has 2,000 members working for the various Arrium businesses, and is one of the representatives on the committee of creditors, which also includes Australia’s big four banks, ANZ, CBA, NAB and Westpac, Spanish bank BBVA and mining contractor Bis Industries.
“They have invested strongly in heavy industry in Europe and the UK and it is this mindset they will bring to Australia,” Mr Walton said.