OneSteel,Smorgon revise takeover plan, blunt BlueScope

MELBOURNE, Dec 18 (Reuters) OneSteel Ltd. and Smorgon Steel Group Ltd. agreed a revised A$1 billion ($781 million) takeover plan that blunts opposition from rival BlueScope Steel Ltd.

and averts competition concerns.

Under the new plan, OneSteel would make an all-share offer for most of Smorgon's businesses and all its debt while keeping Smorgon listed as a steel distributor.

The plan effectively gets around BlueScope, which bought a 19.9 percent stake in Smorgon to block the partners' earlier merger attempt. OneSteel and Smorgon are BlueScope's two main customers.

The new plan only needs 50 percent approval from shareholders instead of 75 percent under the original scheme.

The pair also said they would form a joint venture to make structural pipes and tubes, a move to secure some of the savings expected from a full takeover proposed last June that has been dogged by delays.

''The whole thing has been dragging on for so long, it's good to see a constructive solution put forward,'' said Warwick Cummings, head of equities research at Tyndall Investment Management.

The new plan would boost OneSteel's earnings per share more than the original proposal as the company would be issuing fewer shares while taking on the same amount of debt, which Cummings said the market should view positively.

The June proposal from OneSteel was a cash and share offer worth A$1.8 billion ($1.4 billion), looking to combine Australia's two largest makers of long steel products, such as bars, wires, pipes and rail.

RAN INTO TROUBLE But the plan ran into trouble after BlueScope bought its stake in August, and hit competition concerns, particularly surrounding steel and metals distribution.

''It's far from over, and it'll take some time,'' BlueScope spokeswoman Sandi Harwood said.

The new plan comes after the companies tried to line up a buyer for Smorgon's distribution assets, and after calling off exclusive talks with BlueScope on potential asset sales.

BlueScope is considered the most logical buyer for the distribution business and can afford the best price, a source close to the transaction said.

OneSteel and Smorgon said they would put the new plan to shareholders in late April if it becomes clear by end-January that OneSteel's original cash and share offer will not go ahead.

''While we continue to regard the scheme as the preferred method to complete the merger, the new transaction will enable us to capture all the merger benefits,'' OneSteel Managing Director Geoff Plummer said in a statement.

Based on OneSteel's Friday close ahead of a trading halt, Smorgon shareholders would receive 0.245 shares in OneSteel for every Smorgon share they own, while retaining shares in a smaller Smorgon Steel Group and receiving Smorgon's interim dividend, which is expected to be 5 cents a share.

Smorgon might also give its shareholders a special dividend of 6.2 cents a share.

The offer values the bulk of Smorgon that OneSteel would take over at A$1.02 billion, or A$1.14 a share.

The separate joint venture agreement is subject to approval from the Australian Competition and Consumer Commission and can be called off if a third party makes a takeover offer for all of Smorgon for more than A$1.90 a share.

Smorgon shares, on a trading halt, last traded at A$1.78.

REUTERS DKS RN1354