BlueScope’s US suitor hits back, questions survival of American steel mill

BlueScope’s US suitor has questioned the Australian group’s commitment to North America, suggesting its “stranded” Ohio steel mill needs significant investment and a revised strategy under new ownership to survive.

In its first comments since BlueScope rejected a $13 billion joint bid with the Stokes family’s SGH nearly two weeks ago, the US-listed Steel Dynamics has defended the $30-a-share offer, rejected the target’s knockback as “very disappointing” and challenged the Australian group to realise a superior alternative plan for shareholders.

Founder and chief executive Mark Millett also believes BlueScope’s flagship Northern Star mill in Ohio needs to be combined with another US steel business, describing it as hampered by “severe structural disadvantages” and citing Steel Dynamics as the plant’s “logical owner”.

“The steel mill is essentially a stranded asset and does not have the physical structural capability to provide the necessary value-add products required to supply the geographically disparate coil coating operations,” Mr Millett told an investor conference call in the US overnight Monday.

Mr Millett said Steel Dynamics’ collaboration with Northern Steel over the past 20 years gave the US group “a unique and clearly qualified perspective on BlueScope’s North American strategy and business model, along with the associated earnings capability of their assets”.

“And our respective leadership teams have long understood that industrial logic of combining our businesses,” he said.

Steel Dynamics teamed up with SGH after trying three times since 2024 to interest BlueScope in a buyout with the aim of carving out North Star steel business in North America.

Under the rejected SGH proposal, the owner of the WesTrac heavy equipment business would buy BlueScope and on-sell North Star to Steel Dynamics, retaining the Australian and other offshore steel units.

However, BlueScope adamantly rejected the proposal, saying it significantly undervalued Australia’s biggest steelmaker and insisting shareholders would benefit more by backing the company’s own growth plans.

However, Mr Millett told the earnings call that the proposal “was the most recent in a series of constructive approaches to provide BlueScope shareholders the opportunity to unlock the trapped value of the North American businesses and to find the right home for their businesses in Australia, New Zealand and Asia”.

“That home is clearly with SGH, given their track record of value creation across the industrial space, which closely mirrors the focus on delivery, capital allocation and free cash flow generation of Steel Dynamics.”

The offer, Mr Millett said, reflected “the value of BlueScope’s business appropriately and is significantly higher than the value its shares have ever realised in over 15 years”.

“The commentary within BlueScope’s subsequent public releases regarding the proposal has to be seen as very disappointing,” he said.

“The premise for the board’s rejection was principally based on insufficient value, yet they provided shareholders with no reasonable executable alternative strategy that would provide the same certainty of similar shareholder return.”

Mr Millett rejected BlueScope’s assertion the offer was “an opportunistic foray to acquire assets on the cheap”.

“Our investment premise is straightforward. Steel Dynamics is the logical owner of the North American assets as we can unlock the latent value.

“Currently, North Star BlueScope is a stranded commodity-centric single-site steel mill. It will be pressured by additional hot-rolled coil production capacity coming online in the US within the next 24 months.

“Product diversification is critical for it to sustain earnings power and an imperative for the desired value creation within their acquired coating business.”