SGH & Steel Dynamics Bid for BlueScope Rejected: Undervalued at A$30/share

Background and Deal Structure

On December 12, 2025, a consortium comprising SGH Limited (ASX: SGH), controlled by Kerry Stokes, and U.S. steelmaker Steel Dynamics, Inc. submitted an unsolicited, non-binding indicative proposal to acquire 100% of BlueScope Steel (ASX: BSL) via scheme of arrangement at A$30.00 cash per share. SGH would subsequently sell BlueScope’s North American operations to Steel Dynamics and retain the remainder of BlueScope’s businesses globally.

BlueScope’s Response and Valuation Dispute

The Board of BlueScope unanimously rejected the proposal, asserting that it “very significantly undervalued” its business. Key points include:

• The effective value per share would be reduced by future dividends not yet paid and the delay required to close the transaction.
• BlueScope emphasizes growth initiatives (A$2.3B capital program, A$500M annual uplift from growth, A$200M in cost and productivity improvements in FY2026), and unrealized land value from its 1,200-ha portfolio, rezoning, and monetization potential not reflected in the bid.
• Balance sheet strengths (virtually no net debt at FY2025) contrasted with assumption in the proposal that debt financing would fund a takeover, effectively leveraging BlueScope’s own position.
• Since FY2017: A$3.7B invested in growth, A$3.8B returned to shareholders, and ~18% average ROI.

Investor Sentiment and External Pressure

AustralianSuper, BlueScope’s largest shareholder (≈ 13.5%), has backed the board’s rejection, arguing A$30 is materially too low; signals expectation for a higher bid. Share price reacted strongly— BlueScope stock jumped ~20–22% on the deal announcement, settling just below the A$30 offer.

Strategic Implications

If the deal were to proceed, SGH would absorb BlueScope’s Australia, Asia, and NZ operations—bolstering its industrial footprint, especially in steel and materials. Steel Dynamics would gain BlueScope’s North American assets, notably the North Star steel mill in Ohio, expanding its capacity close to existing operations and auto/industrial end markets. U.S. steel tariffs and protectionism add context to the attractiveness of acquiring domestic mills. The deal structure reflects both strategic positioning (geo-split assets) and regulatory engineering.

Risk Factors and Open Questions

• Regulatory clearance: competition law in both countries, potential concerns over asset sales and market concentration.
• Financing risk: reliance on debt assumes credit markets will support leveraged acquisition under current interest rate conditions and cost of debt.
• Valuation gap: what price would satisfy both BlueScope’s board/shareholders and the buyers? Analysts suggest likely in the mid-A$30s; whether steppers are willing to go higher remains uncertain.
• Operational integration: splitting businesses geographically and reassigning management for North America may generate execution risk, especially given differing market dynamics and costs.
• Market and cyclical risks: steel price spreads in Asia have been soft, FX fluctuations, energy input costs; potential upside is tied to reversion of spreads and currency environment.