The extra 50% of shares on the market for trading means Steel & Tube might be re-rated and move into the top 50 New Zealand stock exchange index.
The 50.3% seller Arrium, formerly known as OneSteel, has recently rejected a $A1 billion consortium takeover play led by South Korean steelmaker Posco and will use the cash from the Steel & Tube sale to reduce debt.
Shares in Steel & Tube were traded down almost 10%, or 24c, at $2.18 about noon.
Craigs Investment Partners broker Chris Timms said all the 50.3% stake had been sold overnight on Tuesday, describing the 37c discount price as a "fantastic opportunity" for buyers.
He said with Arrium wanting to offload such a large tranche of 44.5 million shares, it had to offer a large discount. Arrium's gross sale proceeds were $A73.4 million ($NZ91.6 million), with buyers from institutions and small retail investors.
Forsyth Barr broker Haley Van Leeuwen saw the sale as positive for Steel & Tube, given it was clear Arrium was no longer a shareholder with long-term aspirations, but also predicted some share price instability.
"The long-term value proposition for Steel & Tube lies in the company's ability to turn the earnings performance around and its ability to restore margins to stronger levels," she said.
The $2.05 sale price represented a "significant discount" to the share price as at October 9 at $2.42, and "a period of share price instability" lay ahead until the market re-priced Steel & Tube and reviewed the company's new position, she said.
Mr Timms said Arrium's former 50.3% stake had meant low liquidity in the number of shares traded and Steel & Tube had therefore been kept out of the top 50 index, but he expected that to change, as did Ms Van Leeuwen.
Steel & Tube chief executive Dave Taylor said the sale was a "positive development" for the company and he expected Arrium would continue as a key supplier.
"The company is well positioned to fully explore and take advantage of the potential in the New Zealand steel industry," he said.
For its full-year to June financial report, Steel & Tube booked a 23% slump in annual profit, from $17 million to $13.1 million, because of minimal growth in three key sectors for the industry: manufacturing, construction and rural supply.
Actual revenue for 2011-12 was up 5% to $405 million. Craigs was forecasting for full-year 2013 revenue of $430 million, with after-tax profit rising to $15 million and revenue of $483 million in full-year 2014, with profit up to $21 million.
Important figures
• Steel & Tube, with Fletcher Merchandising, controls 50% of NZ marketHas 50 distribution and service centres, eight reinforcing locations and two Hurricane wire manufacturing sites.
• Four key suppliers are Australian-listed Arrium and Bluescope, NZ Steel and Fletcher Building division, Pacific Steel.
