The board of BlueScope Steel Ltd (ASX: BSL) this week rejected an all-cash, $30 per share takeover offer for the company, which raises the question: What is BlueScope actually worth?
BlueScope Chair Jane McAloon was pretty strident in criticising the takeover offer from SGH Ltd (ASX: SGH) and US company Steel Dynamics (NASDAQ: STLD) as too low, as you can see from these comments she made on Wednesday.
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.
More upside on offer
The team at Jarden have run the ruler over BlueScope, and it's fair to say that they agree with the BlueScope board in this regard.
In terms of what might get the board across the line, Jarden had this to say:
The comments seem to suggest any bid would need to include valuation of potential synergies, recognition of latent property value, recognition of North American asset quality and below mid-cycle APAC conditions to gain board support.
The last comment was referring to Ms McAloon's comments that Asian steel prices are currently at a low ebb, and if prices and foreign exchange rates returned to historical average levels, "this would be expected to generate an additional $400 to $900 million of EBIT per annum relative to FY2025".
Takeover value much higher
The Jarden analysts said under a "break-up scenario", they valued BlueScope at $36 per share, 20% higher than the offer currently on the table.
The analysts have revised their 12-month price target on the company to $32 per share, with a 50% probability that the company will not be bought out, and would therefore be worth $28 per share, and a 50% weighting of a bid at $36.
As the analysts said in a note to clients:
We expect BSL's share price will continue to be driven more by news flow around corporate activity than fundamental valuation. We maintain our neutral rating. The key downside risk is a transaction failing to materialise, while the key upside risk would be a superior proposal.
BlueScope shares were changing hands for $28.83 on Friday morning, down 1.9%.
BlueScope shares closed at $29.40 on Thursday, valuing the company at $12.78 billion.
