Superannuation fund AustralianSuper has boosted its stake in takeover target BlueScope Steel Ltd (ASX: BSL), likely betting that a sweetened takeover offer will be tabled.
In a notice lodged with the ASX late on Thursday afternoon, the superannuation fund indicated that it had increased its stake in BlueScope, which on Wednesday rejected a $30 per share takeover offer from SGH Ltd (ASX: SGH) and US company Steel Dynamics (NASDAQ: STLD).
AustralianSuper's stake in BlueScope increased from 12.5% to 13.52% following share purchases on Monday and Tuesday at prices ranging from $24.38 to $29.55.
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Strong bargaining position
Given that AustralianSuper's stake is higher than 10%, it puts the super fund in a strong bargaining position to potentially block any takeover bid or hold out for a higher price.
Generally, under a takeover scenario, companies can move to compulsorily acquire the shares they do not own if they manage to gain control of more than 90% of a company's shares.
The BlueScope board on Wednesday formally rejected the $30 per share bid from SGH and Steel Dynamics, after news of the bid broke on Monday.
The BlueScope board said it had unanimously rejected the bid, saying it undervalued the company.
BlueScope Chair Jane McAloon put it this way:
Let me be clear – this proposal was an attempt to take BlueScope from its shareholders on the cheap. It drastically undervalued our world-class assets, our growth momentum, and our future – and the board will not let that happen. This is the fourth time we've said no, and the answer remained the same – BlueScope is worth considerably more than what was on the table.
Ms McAloon said the company was "well recognised" for building shareholder value and had delivered over $3.8 billion in shareholder returns since 2017, achieving an average 18% return on invested capital.
Industry at a low point
Ms McAloon also said that steel spread prices in Asia were currently at a low point, and if they returned to historical average levels, "this would be expected to generate an additional $400 to $900 million of EBIT per annum relative to FY2025''.
She added that BlueScope was targeting $500 million in extra earnings from growth programs, which were "well under way", and the company was also targeting $200 million in cost and productivity improvements this financial year.
The proposal from SGH and Steel Dynamics would have involved SGH acquiring all of the shares in BlueScope and then on-selling BlueScope's North American businesses to the American company.
BlueScope shares closed at $29.40 on Thursday, valuing the company at $12.78 billion.
