BlueScope Steel has announced the acquisition of Auckland-based Fletcher Building’s Pacific Steel Group (PSG) for NZ$60 million plus working capital.
According to the ASX announcement by BlueScope, the company will be acquiring the rolling mill and wire drawing facilities located at Otahuhu in Auckland as well as the rolling mill in Fiji, currently operated by PSG.
As agreed by both parties, half of the asking price will be paid upfront and the other half in the second half of 2015. The cost of acquiring working capital is expected to be funded through realization of working capital savings with no significant timing difference.
BlueScope’s wholly owned subsidiary, New Zealand Steel, announced it will invest roughly NZ$50 million in the construction of a billet caster and associated plant in the Glenbrook steelworks, and on integration costs.
The new caster will supply steel billet as feed to the rolling mills in NZ and Fiji. The construction works on the new facilities are expected to create approximately 70 new construction jobs over the duration of the project, which is scheduled to be commissioned during the second half of 2015.
BlueScope’s Managing Director and Chief Executive Officer Mr Paul O’Malley said the acquisition of the PSG downstream assets was an opportunity to better leverage their low cost iron sands and better serve customers with a full range of their products.
“Through improved sales mix and lower cost of production, driven by lower cost raw materials, the acquisition, including integration costs, is expected to achieve an EBIT pay-back within three years from transfer of billet production to Glenbrook,” said Mr O’Malley.
“Today’s announcement is not only a positive step for our business but will help make the New Zealand steel industry more sustainable. We will invest in significant new capital equipment at Glenbrook, create construction jobs and help to secure New Zealand jobs, with significant flow-on benefits to the local communities.”
The acquisition is subject to typical conditions precedent, including New Zealand Commerce Commission clearance. Completion is targeted for mid CY2014.