British company to buy Arrium as Korean bid sinks

Arrium's iron ore operations

Britain’s GFG Alliance has emerged as the buyer of troubled iron ore miner Arrium despite not being the preferred bidder for the company.

Arrium administrator, KordaMentha, today announced it had signed a binding agreement with GFG Alliance to sell the Arrium Group, which also includes steel-making, manufacturing, distribution and recycling divisions.

A Korean consortium, including steel-maker POSCO, was named as the preferred bidder for the South Australian-based company ahead of GFG Alliance last month.

However, GFG Alliance, which is owned by Britain’s Gupta family and includes the Liberty House metals business, modified its offer on Tuesday night to sway KordaMentha in its direction.

Deed administrator Mark Mentha said the proposal was a great result for Arrium’s employees, as well as the city and people of Whyalla where its steelworks are based.

“It ensures their future and ends 15 months of uncertainty,” Mentha said.

“Taking all factors into consideration, including the timeframes required to complete a sale, the administrators and sale advisers Morgan Stanley, decided the GFG Alliance offer was superior to the conditional offer of the Korean consortium with whom we were negotiating.”

The sale is subject to approval by Arrium’s creditors and the Foreign Investment Review Board (FIRB). Completion of the deal is expected later this month, according to KordaMentha.

South Australian Premier Jay Weatherill described the announcement as a “dramatic victory” for SA.

“Any self-respecting nation needs its own capacity to create steel products. This is about building our nation, it is about building our national infrastructure and we cannot be beholden to other countries for a steel industry,” Weatherill said (source: ABC).

Weatherill and SA Treasurer Tom Koutsantonis plan to meet with Liberty House tomorrow.

According to KordaMentha, it will move to the next stages of administration, including finalising returns to creditors, investigations in the affairs of the Arrium Group, and reporting to creditors on the outcome of the administration, once the deal is finalised.

The Korean consortium, led by Newlake Alliance Management and JB Asset Management, and supported by POSCO, was planning to invest $1.4 billion into rejuvenating Arrium’s operations, including the Whyalla steelworks.

However, the consortium reportedly had “internal issues” that affected its offer for Arrium, which entered voluntary administration in April 2016.

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