• Value the only real obstacle to reaching terms with suitors
• Regulatory and financial concerns likely minimal
• Bidders can afford to pay more than AUD 30 p/s, say brokers

Bluescope’s board believes a decent takeover offer for the ASX-listed steel producer needs to be priced in the mid to high AUD 30s per share and probably closer to the latter, said sources familiar with the situation.

The news comes after Bluescope, late on Wednesday (7 January), rejected an indicative AUD 30 per share takeover proposal received from ASX-listed SGH and NASDAQ-listed Steel Dynamics. In a 17-page presentation, the company said it had rejected the bid “on the basis that it very significantly undervalued BlueScope.”

The sources claimed Bluescope has received unanimous support from its leading shareholders to not grant the suitors due diligence and to reject the proposal.

A third source familiar with the situation said SGH’s feedback from Bluescope’s shareholders was that they are happy there is a proposal, but would like more with a proposal under AUD 35 likely to be satisfactory. “I would be surprised if shareholders want the deal to fall away.”

Prior to the rejection, shares in Bluescope had today closed at AUD 29.87 for a market value of AUD 13.09bn (USD 8.82bn). The stock has traded close to the indicative bid price since news of the potential deal – the latest in a series of takeover attempts by Steel Dynamics that date back two years – emerged on Monday (5 January).

The bidders’ offer would see SGH acquire Bluescope and on-sell Bluescope’s North America business to Steel Dynamics, which has in the past had a series of offers rebuffed by Bluescope. The most recent of these was in early 2025, when the US strategic offered to buy Bluescope and retain its North American operations while distributing the non-North American assets to BlueScope shareholders. That deal valued North America at AUD 24 per share and asserted the value of the remaining assets to be at least AUD 9 per share

All of the sources agreed the deal’s future hinges on valuation considerations rather than other typical M&A risks. In previous takeover proposals, Bluescope has expressed concerns around regulators and financing, but the sources acknowledged that these are not major obstacles as this offer has been structured so it does not require approval from FIRB given that it is an Australian company, SGH, buying an Australian asset, Bluescope.

The sources added that SGH and Steel Dynamics are large reputable groups unlikely to encounter funding problems.

Meanwhile, the first batch of broker reports out on the situation suggest Bluescope bidders have scope to pay more and/or that Bluescope is worth more.

The highest valuation comes from Jefferies. Its base case scenario of AUD 37 assumes Bluescope’s Asian spreads do not recover, and its NorthStar spreads are USD 450/t from 2H26. The broker’s upside scenario values Bluescope at AUD 40 p/s, which reflects its “break-up sum of the parts” value, “which could be realised through further M&A interest and potential asset divestment showing value realisation for the rest of Bluescope’s business.”

Jefferies’ downside scenario values Bluescope at AUD 17 p/s and is based on the possibility that Asian and NorthStar spreads fall. This case also assumes no M&A interest.

BofA argues SGH’s bid for Bluescope makes sense strategically and “the leverage is manageable”. The banks says the existing proposal implies an acquisition multiple of around 6.7x EV/EBITDA, which is well below SGH’s multiple of 10.5x EV/EBITDA.

The bank goes on to say that assuming the value of Bluescope’s business ex- North America remains around AUD 9 p/s, it estimates SGH would pay around AUD 4.1bn to acquire it. That implies SGH’s FY26E pro-forma net debt/EBITDA would stand at 2.7x versus 1.9 currently. “We think this is manageable given SGH’s leverage reached 3.8x at peak of Boral acquisition in FY22, but SGH managed to deleverage fairly quickly post that.”

Bell Potter’s estimates that AUD 30 p/s implies SGH is paying AUD 6 – AUD 9 per share for Bluescope’s non-NA assets or 8.4-12.6x EV / FY25a EBIT.

Macquarie expects SGH to try sell Bluescope’s Asian portfolio as its stated strategy is Australia focused. The firm notes that this divestment would potentially be triggered by change of control provisions, as Nippon Steel is Bluescope’s partner in all its assets, except China.

The bank calculates that an AUD 30 bid implies a 10.6x FY27 EV/EBIT for Bluescope compared to a long-range average of ~7.7x, while SGH’s FY27 EV/EBIT of ~13.7x on Steel Dynamics FY26 EV/ EBIT of ~11.0x. On the basis of an AUD 4.2bn value on Bluescope’s Australian assets “we think SGH’s pro forma FY27 ND/ EBITDA could be about 2.2x, so quite manageable.”

MST Marquee does not believe AUD 30 will satisfy the Bluescope board and its investors and points to unrealistic exclusivity conditions in the bid proposal. It says a revised bid may need to be around-or-above the mid-AUD 30/share range for proper board and investor consideration. “Given Steel Dynamics’ multiple bids for Bluescope’s North America business and SGH’s recent history of increasing its Boral bid, we expect a higher offer.”

Bluescope and the SGH-Steel Dynamics consortium declined to comment.