Just over half the shares in steel products distributor Steel
and Tube were snapped up in a matter of hours after they were
put up for sale by its parent company, Australia's Arrium,
the deal's underwriters Craigs Investments Partners said.
Arrium, formerly OneSteel, had earlier decided to sell its
50.3 per cent stake in Steel and Tube for $91.2 million, with
Craigs IP underwriting the sale at $2.05 a share - a 15 per
cent discount to Tuesday's closing price.
"We underwrote the deal and we were highly confident that we
could get it done quickly and that proved to be the case,"
John Moore, head of equity capital markets at Craigs IP, told
The stock last traded at $2.23, down 7.9 per cent or 19c from
The relative ease of the sale came despite tough times in the
steel distribution sector. In New Zealand, total steel demand
is still about one quarter down from where it was before the
global financial crisis.
And in August, Steel & Tube reported a 23 per cent fall
in annual profit to $13.1m as dwindling demand and stiff
competition squeezed margins.
Arrium said proceeds from the sale, which will add to A$120
million already raised from asset sales, would be used to
Steel and Tube has a history of having big chunks of its
stock tied up with one owner. Fletcher Metals bought a 24.9
per cent stake from British Steel Corp in 1980.
Since then, Tubemakers of Australia, the BHP offshoot, held a
major stake. Steel and Tube then became part of BHP before
BHP split off its steel making interests in the form of
OneSteel, in 2000.
Late in 2008, on the cusp of the global financial crisis,
OneSteel made an offer to buy the remaining shares in Steel
and Tube, at $4 a share but the company pulled its offer when
it became clear world markets were about to tank.
Fund managers said a lack of liquidity in the stock has in
the past acted as a disincentive for investors, but Moore
said the company now had a diverse spread of mostly local
institutions and private investors on its register.
Rickey Ward, domestic equities manager at Tyndall Investment
Management, said a broader shareholder base would help Steel
and Tube's case for its inclusion on the main share index,
Inclusion on the NZX50 would make Steel and Tube more
desirable for passive funds, which use indices as guide to
weight their portfolios.
Underwriting fees for share placement deals vary, but the
norm is about 2 per cent of the total transaction,
potentially making the deal worth around $1.8m to Craigs IP.
Tuesday was a big day for the investment bank - which also
ran a book-build to gauge interest for shares in beer brewer
Moa, which is due to register its prospectus tomorrow.