Liberty House beats Korean PE consortium to Arrium deal

Newlake Alliance and JB Asset Management – whose offer was supported by Korean steelmaker Posco – were named the preferred bidder for the company in June. GFG Alliance, which is controlled by the Gupta family, the founders of Liberty House, was the other shortlisted bidder.

However, KordMentha, Arrium’s administrator, said in a statement that GFG submitted a follow-up offer that was superior to the conditional proposal made by the Korean consortium.

The future of Arrium’s Whyalla steelworks in South Australia was a key part of the negotiations. The regional government has already agreed to contribute to the deal, but the Korean bid reportedly included a request for federal government support as well. The final funding package was not in place by the agreed deadline, opening the door for GFG.

Arrium, which was spun-off from BHP Billiton in 2000, entered voluntary administration in April 2016 with around A$1 billion ($759 million) in outstanding debt owed to banks and A$2.8 billion in unsecured facilities.

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.

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