Korean PE consortium named preferred bidder for Arrium

KordMentha, Arrium’s administrator, identified the private equity firms as Newlake Alliance and JB Asset Management. It said the Korean consortium was one of two shortlisted bidders for the asset, alongside UK-based industrials and metals group Liberty House. Financial details of the transaction were not disclosed.

It has been reported that the consortium will invest A$1.4 billion ($1 billion) in cheaper and cleaner steelmaking technology licensed from Posco as well as a new gas power plant. There will also be discussions with the federal and regional government about investments in Arrium’s operation in Whyalla, South Australia.

“Having seen first-hand the impressive technology and scale of the Posco business, it is exciting to be working with a company of such high regard with a proven track record that can truly transform the Whyalla operations,” Tom Koutsantonis, South Australia’s treasurer, said in a statement.

Arrium, which was spun-off from BHP Billiton in 2000, entered voluntary administration in April 2016 with around A$1 billion in outstanding debt owed to banks and A$2.8 billion in unsecured facilities. It achieved a market capitalization of close to A$7 billion prior to the global financial crisis and a subsequent collapse in steel prices.

Moly-Cop, the company’s mining consumables business, was sold to American Industrial Partners last November for an enterprise value of $1.23 billion. The division reported sales of $1.02 billion and EBITDA of $156 million in the 2016 financial year. This compares to sales and EBITDA of A$1.59 billion and A$210.5 million, respectively, in 2015.

Arrium as a whole generated sales of A$6.1 billion in 2015, down from A$7 billion the previous year, while EBITDA dropped to A$350.9 million from A$864.2 million. Substantial impairment costs saw Arrium swing from a net profit of A$205.4 million in 2014 to a loss of A$1.92 billion in 2015.

Newlake was set up four years ago by two former executives from The Blackstone Group and one from CVC Capital Partners. It claims to have KRW600 billion ($529 million) in assets under management as of October 2016. JB Asset Management, which is a subsidiary of JB Financial Group in 2014, has teams covering private equity, energy and resources, real estate, and securities.

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• Topics
• Australasia
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• Buyouts
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• South Korea
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