Steel & Tube deal a sign the market's not asleep

The broking firm behind the Steel & Tube deal says the quick sale of ASX-listed Arrium’s majority stake in the materials supplier is a sign the market is alive and well.

Craigs Investment Partners sold mining and mineral company Arrium's 50.3% stake,  fetching $91.2 million, within two hours after the market closed on Tuesday.

“That’s not a market that’s asleep,” says Craigs’ head of equity capital markets John Moore.

The shares were sold to a selection of New Zealand institutional shareholders at $2.05 a share yesterday.

Mr Moore said the transaction defied views the New Zealand equity market is a shell of itself, moribund and asleep.

“People have queried whether or not the market will stand up to a Mighty River Power float.

“There’s a lot of investment money in New Zealand … far too much of it is sitting in bank accounts, lots in property too, and it is actually looking for a home and equities that pay yields out there in the market.”

Mr Moore said the transaction had returned a good New Zealand asset back to New Zealand investors.

“Many say, oh dear – here’s another Aussie institution dumping a New Zealand asset.

“Instead, this is a good New Zealand asset back in New Zealand hands.”

Although the $2.05 sale price was a 37% discount to the market price at the time, Mr Moore says it needed to be recognised Arrium’s sale was a significant event, which had transformed Steel & Tube’s share register.

Shares in Steel & Tube had been thinly traded, without much institutional following.

The company had now set itself up for a return to the NZX50 index, which would generate more interest in the company.

Steel & Tube shares dropped 8.3% yesterday to $2.22 – 17c above the deal price.

Mr Moore says a fall in the share price was to be expected after the deal.
 

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7 Comments & Questions

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Wo wo wo, back the cart up..
It was sold at an eye watering discount - 22%
It will be moved into the NZX50 - so all the zombie funds will have to hold large chunks
It is likely that these same funds will sell out to some foregin buyer within the next couple of years - FPA, PGW, NZF
The market is dead - how many IPO's this year, how many decent rights issues?
Investment Bankers have nothing better to do at the moment than drive there daughters to music lessons....

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But I'm still working a four day week

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my craigs broker sent me an email about the offer so I bought some.

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And how much did you pay for those Red Dog?

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Totally concur with Anonymous #1 comments.
If Arrium really valued S&T as an asset, they would not have dumped the shares so unceremoniously at the value secured.
Lets not forget whom S&T mainly service - the NZ Manufacturing sector & look how well that is doing at present?

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S & T has rebranded, slimed down and gained market share in a contracting market. A good place to be when the rebuild begins and the mezzanine finance returns? Don't forget about the the housing shortage in Auckland either. They may not make APPS for IPhones or Craft beer but they provide the building to keep your computer and you head dry.

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Arrium selling off the shares says more about Arrium's current financial situation than it does about Steel & Tube. Interestingly a $76M injection into a $2.18B debt to meet bank covenants? Not that flash. On the other hand, Steel & Tube is a solid and consistent performer. You are right Manufacturing is soft but what's that happening in Christchurch? Oh yes, a rebuild of the city and major infrastructure and who's guessing that it is unlikely to be in unreinforced concrete. I see a skyline of steel buildings and steel reinforced concrete bridges. Rosy for a steel company unshackled from it's Australian owner ...

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