SYDNEY, Australia (AP) - Australian steel giant OneSteel Ltd. launched a $1.16 billion takeover of rival Smorgon Steel Ltd. This move one executive says will help Australia meet rising competition from China.
OneSteel Chairman Peter Smedley said the takeover was a logical step for Australia's steel industry in the face of intense competition from overseas steel producers.
''The transaction represents the next step in the restructuring of the Australian steel industry,'' Smedley said in a statement. ''It will further consolidate the sector, leading to a lower cost and more efficient steel industry from which to effectively compete in the world steel market for years to come.''
OneSteel said it hoped the takeover would take place by October, subject to approval from Australia's antitrust regulator, the Australian Competition and Consumer Commission.
Under the proposed deal, Smorgon shareholders will receive a combination of OneSteel shares and cash to the value of $1.23 per share, a 31.8% premium over the last month's average value of Smorgon shares.
Smorgon investors will receive nine OneSteel shares for every 22 Smorgon shares that they hold. Smorgon's directors have unanimously recommended the OneSteel offer in the absence of a superior bid.
''Although I will be sad to see the end of Smorgon Steel's existence as a separate company, I am delighted that the offer from OneSteel reflects the inherent value of the company,'' Smorgon Chairman Graham Smorgon said.
OneSteel is Australia's largest producer of steel long products, making 1.7 million tons of steel a year and selling a total of 2.2 million tons a year of steel and metal products.