BlueScope's Top Investor Backs Rejection of $8.8 Billion Offer

BlueScope Steel Ltd.'s largest shareholder, AustralianSuper, supported the company's decision to reject a $8.8 billion takeover bid from Steel Dynamics Inc. and SGH Ltd. The move came as the board said the offer significantly undervalued the company.

Steel Dynamics and SGH had proposed a $30 per share offer for BlueScope, which was unanimously rejected by the board. The offer was deemed insufficient by AustralianSuper, which holds a 13.5% stake in the company.

BlueScope's shares had surged over 20% when the offer was first announced but have since retreated to around $29 per share. The rejection has raised questions about the future of the bid and whether the bidders might revise their offer.

Why the Move Happened

BlueScope's board argued that the bid failed to reflect the company's full value. They cited BlueScope's strong growth investments and future earnings potential, including the potential for additional earnings if steel spreads and FX rates revert to historical averages.

AustralianSuper echoed the board's sentiment, stating that it would only support a materially higher offer. The pension fund has been a long-term backer of BlueScope and has previously rejected other bids.

Steel Dynamics has previously attempted to acquire BlueScope's North American assets. The rejection marks the fourth time the company has turned down offers from the U.S. steelmaker.

How Markets Responded

BlueScope's stock fell slightly after the rejection, trading at around $29 per share on Friday. The price remained below the $30 bid level, suggesting investors expect further volatility.

SGH's shares also dipped slightly, indicating market skepticism about the bid's prospects. Steel Dynamics' shares fell 2.8% in U.S. trading, reflecting concerns about the deal's viability.

Macquarie analysts noted that the rejection does not necessarily end the bid. They predicted that the bidders might reconsider the offer and increase the price to gain shareholder support.

What Analysts Are Watching

Investors are watching to see if the bidders will revise their offer. BlueScope's board has signaled that any future proposal must reflect the company's true value. A higher bid could reignite interest among shareholders.

Analysts are also monitoring BlueScope's strategic direction. The company has emphasized its focus on executing its long-term strategy and delivering shareholder returns. BlueScope has invested over $3.7 billion in growth projects since 2017 and delivered over $3.8 billion in shareholder returns.

The outcome of the bid could also have regulatory implications. BlueScope's operations in North America account for about 45% of its revenue, making regulatory scrutiny a potential hurdle for any deal.