Steel-making giant BlueScope Steel has struck a $1.36 billion joint venture deal the company says will help it capitalise on overseas markets and wipe out debt.
The company says, however, that it still expects a loss of around $US 1 billion in the current financial year.
In a statement to the Australian Stock Exchange (ASX) late on Monday, BlueScope said it had agreed to form a joint venture with Nippon Steel Corporation of Japan which will encompass BlueScope’s ASEAN and North American building products businesses.
Under the deal, which is subject to regulatory approval, BlueScope will sell several of its current building products businesses into a new joint venture company which will be 50 per cent owned by BlueScope and 50 per cent owned by Nippon.
In return, BlueScope will receive approximately $US540 million in cash after allowing for taxes, minority interests and transaction costs.
The new company, which will be known as NS BlueScope Coated Products, will be headquartered in Singapore.
The new venture will include BlueScope’s building products businesses in Indonesia, Malaysia, Thailand, Vietnam, Singapore, Brunei, Myanmar, Cambodia, Laos and the Philippines as well as its North American Steelscape and ASC Profiles businesses.
The transaction does not affect BlueScope’s building products businesses in Australia, China or India or the company’s Global Building Solutions business.
BlueScope says the new joint venture will facilitate entry into markets it currently has difficulty accessing and speed up the company’s entry into new markets.
For example, the new joint venture will supply whitegoods manufacturers who offer products to Asia’s fastest growing middle class. In addition, the proceeds from the deal will virtually wipe out BlueScope’s $384 million in debt (as of June 30, 2012).
“This is a significant new platform to enhance our growth opportunities in some of the fastest growing markets in the world,” says BlueScope managing director and CEO Paul O’Malley. “The proceeds received from NSC will afford BlueScope further financial flexibility and balance sheet strength to continue to grow businesses delivering strong returns.”
O’Malley says BlueScope and Nippon share a long-standing relationship and have collaborated in over 65 different projects over 40 years of association.
BlueScope also reconfirmed guidance of a net loss after tax for 2011/12 of $US1 billion when it releases its full year audited financial statements in one week’s time. The loss will predominantly reflect restructuring costs and impairment charges relating to its Australian business.
Over the past year, the company has cut nearly 1,500 jobs, shut facilities at Port Kembla in NSW and closed its export steel business.