Sale of N.Z. Steel expected next week

Press, 31 March 1989, Page 14

Sale of N.Z. Steel expected next week

By

BRENDON BURNS

in Wellington

A conclusion to the sale of New Zealand Steel is expected next week.

Mr Fred Watson, the receiver for Equiticorp International, which owns 80 per cent of the South Auckland steel mill, has confirmed that negotiations are continuing with local and international parties. Mr Watson had been reported as ruling out a Chinese company, Minmetals, from the tender process. Minmetals, one of China’s largest State-owned corporations, had earlier been portrayed as the frontrunner to buy New Zealand Steel. Mr Watson said four proposals had been received for Equiticorp’s stake, including Minmetals.

A further round of negotiations was under way and these were expected to conclude on April 7, he said.

Interest had also been expressed by other Asian parties, said Mr Watson. Minmetals has an annual turnover of nearly $lO billion and 39 overseas subsidiaries. The other bidders for New Zealand Steel include Fletcher Challenge, which sees the mill as complementing its Pacific Steel operation, which recycles metal.

Elders Resources NZFP was another confirmed bidder, and Australia’s giant steel making company, Broken Hill Proprietary Company (BHP) was suggested to be in the race.

Minmetals was said by one report to be offering more than $2OO million above any rival bid.

New Zealand Steel had been sold by the Government to Equiticorp in October, 1987, for $327M.

A major extention to the steel plant, approved by the Muldoon Government on the eve of the 1981 election, had been given Government guarantees for its financing. The extension eventually cost more than $2 billion — more than four times its original estimate —- most of which was met by the taxpayer. Equiticorp, which crashed in January, held 80 per cent of New Zealand Steel at that time, having sold a 20 per cent shareholding to Fisher and Paykel. NZPA reports that bidders for New Zealand Steel have told the Government about plans for a major investment to expand the business, according to Finance Minister, Mr David Caygill, yesterday.

“A number of the bidders have looked at expanding the plant, not merely buying it but making something even bigger and better of it.”

Mr Caygill said “one or two” bidders had approached the Government to indicate their intentions for New Zealand Steel and its Glenbrook mill.

“I haven’t encouraged them to do that because I don’t see that as part of our role. But we’re reasonably well informed.” Attention was now focused on the sale of the Equiticorp shareholding, Mr Caygill said. “There is more to the story than that. Ultimately you’re looking at a resource there that may well be the subject of further expansion.” Mr Caygill cited an expansion of New Zealand Steel as one of four major investment projects “of the kind that generate hundreds of jobs” which he knew were now being looked at in New Zealand. A buyer of the mill would make use of its efficient technology and its location.

“It’s small scale by international standards, having a tiny market of the Asian-Pacific market and therefore able to trade very competitively and switch between a number of markets.”

Mr Caygill said other major investments could be made by Comalco, adding another potline to its Tiwai smelter, Elders ResourcesNZFP, expanding its Kinleith mill, and Coalcorp, developing a mine at Rapahoe on the West Coast.