Listed Steel and Tube is spending $27.5 million buying Tata
Steel International Australasia, a division of giant global
steel supplier Tata Steel, of India.
Tata Steel International supplies stainless steel,
engineering steels and composite floor decks to the New
Zealand and Pacific Island markets.
Steel and Tube chief executive Dave Taylor said the
acquisition would further strengthen the company's position
as New Zealand's leading steel distribution company, in
construction, manufacturing and rural businesses around the
Steel and Tube shares were up slightly, at $2.97, following
Forsyth Barr broker Andrew Rooney said the purchase was ''a
positive step'' for Steel and Tube, as it sought to solidify
its market-leading steel-distribution position in New
Craigs Investment Partners broker Peter McIntyre said that
the acquisition was a ''good strategic fit'', and with
combined operation synergies between Steel and Tube and Tata
Steel International Australasia should provide good growth
Mr Rooney said Tata NZ operated from eight locations:
Auckland, Hamilton, Tauranga, New Plymouth, Hastings,
Wellington, Nelson and Christchurch, which he expected would
provide synergy benefits based on site consolidation.
According to Companies Office records, Tata Steel
International (Australasia) had revenue of $74.4 million for
the year to March, compared with $93.3 million the previous
Steel and Tube's half year to December booked an increase
from $199.6 million last year to $211.7 million, while its
after-tax profit rose from $7.3 million to $8 million.
''An acquisition of this type has been expected for a long
time, given the oversupply in the steel distribution
industry, albeit this is relatively niche.
''We expect the acquisition strengthens Steel and Tube's
industry position more so than removing significant
oversupply,'' Mr Rooney said.
However, Mr Rooney cautioned that oversupply in the sector
would continue to exist following the acquisition and an
expected consolidation of assets would be a constraint on
Steel and Tube's profit margins.