A Korean consortium, including leading steel-maker POSCO, has been chosen as the preferred bidder for South Australian-based iron ore company Arrium, which entered voluntary administration in 2016.
The consortium, led by Newlake Alliance Management and JB Asset Management, and supported by POSCO, plans to invest $1.4 billion into rejuvenating Arrium’s operations, including the Whyalla steelworks.
Arrium’s administrators, KordaMentha, and investment bank, Morgan Stanley, are working with the consortium to finalise the sale as soon as possible, an announcement outlined.
The sale process will include discussions with the federal and South Australian governments on future investment in Arrium’s Whyalla operations.
KordaMentha’s Mark Mentha said after a 14-month administration and nine-month sale process “we are now an important step closer” to providing certainty to employees, creditors, suppliers, customers and the Whyalla community.
“We thank all those people for their patience and support during one of Australia’s most complex administrations,” Mentha said.
The Korean consortium beat out UK-based Liberty House, the other short-listed group that targeted Arrium, to become the preferred bidder.
It plans to overhaul Arrium’s operations by upgrading to POSCO’s low cost and cleaner FINEX steel-making technology and a gas power plant.
POSCO has history with Arrium, having made a rejected $1.2 billion takeover offer for the company in 2012.
The preferred bidder announcement has received political support, with SA Treasurer Tom Koutsantonis hoping it would provide some certainty to the people of Whyalla.
“This is one of those great examples after a long and torturous process, a lot of uncertainly, tonight we’re getting closer to the end of the tunnel,” he commented on the ABC website.
“The investment proposal put forward by the Newlake Consortium aims to make Whyalla the first city outside of South Korea to adopt the innovative FINEX process for steelmaking developed by POSCO, one of the world’s major steelmakers.”
An acquisition by the Korean consortium is subject to approval from Arrium’s committee of creditors and the Foreign Investment Review Board (FIRB).
The Australian Workers’ Union urged the South Australian and federal governments to work constructively to meet the requirements of the Korean consortium.
AWU national secretary Daniel Walton said the cooperative efforts of all major stakeholders had brought Arrium and Whyalla to the brink of salvation, but it was up to government to go the last mile.
“As the legal representative of over 2000 Arrium workers I am extremely encouraged by the important step we have taken in settling on a preferred bidder,” Walton said.
“Through the continued cooperation of union employees, Arrium’s creditors, and the administrator, a positive outcome is now eminently achievable. The Korean Consortium requires government commit to meeting some maintenance costs over a five-year period while the company invests $1.4 billion into building the FINEX steelworks and an off-gas power plant.
“This is a deal our governments should absolutely make. It is the national interest for Arrium’s operations, especially in Whyalla, to stay running.”