BlueScope Steel urges shareholders to keep the faith with $438 million special dividend

BlueScope Steel has urged shareholders to keep the faith in the face of takeover interest by returning $438 million of surplus cash through a special dividend.

The $1-a-share unfranked payout aims to underline BlueScope’s assertions that it can do better for shareholders than a rejected $13 billion offer by the Stokes family’s SGH and US group Steel Dynamics.

“This dividend decision is part of BlueScope’s established capital management framework and is independent of any prior or potential future proposals for the company,” Australia’s biggest steelmaker said on Wednesday.

Outgoing BlueScope chief executive Mark Vassella said the special dividend “demonstrates BlueScope’s ability to generate and distribute returns to its shareholders”.

“With a clear line of sight to the completion of our current significant capital investment program, BlueScope is positioned to not only return to the robust cash generation it has been known for, but to strengthen it further with the enhanced earnings of the business,” Mr Vassella said.

“The board will continue to carefully balance investment in growth with shareholders returns as cash flows build.”

BlueScope’s board last week emphatically rejected a $30-a-share offer by SGH and Steel Dynamics - the fourth approach by the US steelmaker in two years - saying it significantly undervalued BlueScope.

The suitors want to split BlueScope, with SGH retaining the Australian operations and Steel Dynamics taking the more profitable steel businesses in North America.

Under their proposal, the rejected offer would be reduced to $29 by the dividend. Any other payouts would further impact their price.

However, BlueScope and the bid partners remain far apart on value, with the likelihood that SGH and Steel Dynamics will have to add at least several dollars to their offer to interest the BlueScope board in talks.

The surplus cash being returned is derived from BlueScope’s $167m sale of a 50 per cent interest in the Tata BlueScope joint venture, and land sales.

BlueScope’s biggest shareholder, AustralianSuper, has already warned SGH and Steel Dynamics need to pay ““materially” more than $30 a share to win the company.

“The current offer for BlueScope does not reflect what we presently believe is the underlying value of the business,” it said last week.

The BlueScope board was unusually emphatic in its rejection of the joint offer, with chair Jane McAloon’s strongly worded statement leaving no doubt $30 would not cut it.

“Let me be clear, this proposal was an attempt to take BlueScope from its shareholders on the cheap,” she said.

“It drastically undervalued our world-class assets, our growth momentum, and our future — and the board will not let that happen,” Ms McAloon said.

BlueScope shares were trading 6¢ lower at $29.78 as at 12.30pm.