bigdog
Retired many years ago
- Joined
- 19 July 2006
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The SP today has increased 4.27%
BSL +$8.80 +$0.36 +4.27% 3,294,196 $28,406,383 30-Jan 15:07:52
The SP is almost 12 high!
I hold BSL
Todays Age is update on proposed merger of OneSteel and Smorgon Steel
http://www.theage.com.au/news/busin...rns-into-a-saga/2007/01/29/1169919274186.html
Merger proposal turns into a saga
Hank Spier
January 30, 2007
WHEN OneSteel and Smorgon Steel proposed their merger, the Australian Competition and Consumer Commission issued a 15-page statement of issues ”” a series of red lights ”” expressing concern. Six months later, not one of those red lights has turned green.
The merger proposal is becoming a saga. In their latest incarnation of the deal on December 18, the proponents acknowledged there was little prospect of the original proposal proceeding.
But this week the ACCC is being asked to approve what is essentially the same deal, broken into stages ”” without the original misgivings being resolved. Are the parties "playing" with the ACCC?
Not surprisingly, the merger still faces major difficulties in obtaining clearance in its original scheme of arrangement announced last June 26, and the December 18 alternative deal structure. Hopefully the ACCC is very suspicious.
Throughout, OneSteel and Smorgon Steel have sought to make light of the ACCC and BlueScope Steel's 19.99 per cent blocking actions, but they did ask the ACCC in September to suspend its clearance decision-making process and, on December 18, they proposed a plan B merger structure.
The alternative structure seeks to avoid BlueScope's blocking stake by abandoning a scheme of arrangement and seeking to achieve the takeover by way of an asset sale, but contains nothing to deal with the ACCC's statement of issues. Those in the industry who expressed concerns about plan A are entitled to be frustrated.
In the ASX December 18 announcement, the parties were coy about their ACCC problems (and even more so about the contingent capital gains tax liabilities Smorgon Steel shareholders may face).
The parties may be hoping that by breaking the merger into steps, the ACCC might approve each step in isolation of the others ”” a not unknown tactic. If this is the strategy, it will be tested tomorrow, when the ACCC is due to decide on the first step in plan B ”” a pipe and tube joint venture.
OneSteel has been quite open in stating that plan B was designed to bring forward a merger and the realisation of some of the synergies the merger would deliver.
It is difficult to see Smorgons in any joint venture and, if cleared by the ACCC, plan A would be soon back on the table, yet a different table with part of what may be a "creeping" acquisition already in place.
That joint venture would permit OneSteel to acquire Smorgon's share of the joint venture ”” pipe and tube manufacturing ”” in a range of possible circumstances. These include where there is a change of control or where a major customer or supplier gains a seat on Smorgon's board.
It is hard to understand why the Smorgon Steel board would lock up a key part of its business by entering into the pipe and tube joint venture with OneSteel, before getting an answer from the ACCC on the balance of the merger proposal.
But it seems neither OneSteel nor Smorgon is keen to obtain the answer from the ACCC on their merger. Neither has answered the many issues the ACCC raised in August.
The ACCC had five "red light" issues and six "amber light" issues about the merger of Australia's only two long product steel manufacturers.
One ACCC red-light issue was reinforcing bar, rod and mesh, yet the parties' plan B still involves OneSteel acquiring all Smorgon's reinforcing bar, rod and mesh assets, including the reinforcing distribution business.
Another red-light issue was scrap metal. The parties have ignored the ACCC and surprisingly entered a five-year exclusive agreement for the supply of scrap. Again, plan B would result in Smorgon's scrap metal business sold to OneSteel
Steel distribution, another red-light issue, would be left with Smorgon, but Smorgon would be commercially dependent on its largest distribution competitor, OneSteel.
It is time for OneSteel and Smorgon Steel to inform the market properly about how and when they expect ACCC approval, and when might they begin to address the real red-light issues.
Hank Spier was a senior executive of the ACCC from 1983 to 2000.
BSL +$8.80 +$0.36 +4.27% 3,294,196 $28,406,383 30-Jan 15:07:52
The SP is almost 12 high!
I hold BSL
Todays Age is update on proposed merger of OneSteel and Smorgon Steel
http://www.theage.com.au/news/busin...rns-into-a-saga/2007/01/29/1169919274186.html
Merger proposal turns into a saga
Hank Spier
January 30, 2007
WHEN OneSteel and Smorgon Steel proposed their merger, the Australian Competition and Consumer Commission issued a 15-page statement of issues ”” a series of red lights ”” expressing concern. Six months later, not one of those red lights has turned green.
The merger proposal is becoming a saga. In their latest incarnation of the deal on December 18, the proponents acknowledged there was little prospect of the original proposal proceeding.
But this week the ACCC is being asked to approve what is essentially the same deal, broken into stages ”” without the original misgivings being resolved. Are the parties "playing" with the ACCC?
Not surprisingly, the merger still faces major difficulties in obtaining clearance in its original scheme of arrangement announced last June 26, and the December 18 alternative deal structure. Hopefully the ACCC is very suspicious.
Throughout, OneSteel and Smorgon Steel have sought to make light of the ACCC and BlueScope Steel's 19.99 per cent blocking actions, but they did ask the ACCC in September to suspend its clearance decision-making process and, on December 18, they proposed a plan B merger structure.
The alternative structure seeks to avoid BlueScope's blocking stake by abandoning a scheme of arrangement and seeking to achieve the takeover by way of an asset sale, but contains nothing to deal with the ACCC's statement of issues. Those in the industry who expressed concerns about plan A are entitled to be frustrated.
In the ASX December 18 announcement, the parties were coy about their ACCC problems (and even more so about the contingent capital gains tax liabilities Smorgon Steel shareholders may face).
The parties may be hoping that by breaking the merger into steps, the ACCC might approve each step in isolation of the others ”” a not unknown tactic. If this is the strategy, it will be tested tomorrow, when the ACCC is due to decide on the first step in plan B ”” a pipe and tube joint venture.
OneSteel has been quite open in stating that plan B was designed to bring forward a merger and the realisation of some of the synergies the merger would deliver.
It is difficult to see Smorgons in any joint venture and, if cleared by the ACCC, plan A would be soon back on the table, yet a different table with part of what may be a "creeping" acquisition already in place.
That joint venture would permit OneSteel to acquire Smorgon's share of the joint venture ”” pipe and tube manufacturing ”” in a range of possible circumstances. These include where there is a change of control or where a major customer or supplier gains a seat on Smorgon's board.
It is hard to understand why the Smorgon Steel board would lock up a key part of its business by entering into the pipe and tube joint venture with OneSteel, before getting an answer from the ACCC on the balance of the merger proposal.
But it seems neither OneSteel nor Smorgon is keen to obtain the answer from the ACCC on their merger. Neither has answered the many issues the ACCC raised in August.
The ACCC had five "red light" issues and six "amber light" issues about the merger of Australia's only two long product steel manufacturers.
One ACCC red-light issue was reinforcing bar, rod and mesh, yet the parties' plan B still involves OneSteel acquiring all Smorgon's reinforcing bar, rod and mesh assets, including the reinforcing distribution business.
Another red-light issue was scrap metal. The parties have ignored the ACCC and surprisingly entered a five-year exclusive agreement for the supply of scrap. Again, plan B would result in Smorgon's scrap metal business sold to OneSteel
Steel distribution, another red-light issue, would be left with Smorgon, but Smorgon would be commercially dependent on its largest distribution competitor, OneSteel.
It is time for OneSteel and Smorgon Steel to inform the market properly about how and when they expect ACCC approval, and when might they begin to address the real red-light issues.
Hank Spier was a senior executive of the ACCC from 1983 to 2000.
