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.