Australian building materials manufacturer BlueScope Steel has been given the go-ahead to acquire a key pipe and steel manufacturing business.
On Thursday, the Australian Consumer and Competition (ACCC) said it would not oppose BlueScope’s proposed acquisition of the Orrcon Steel business from Adelaide based Hills Holdings Ltd which formed part of a transaction announced in August which would see the local steel giant fork out $87.5 million for Hills Orrcon business as well as its Fielders construction products business.
A maker of pipe and tube products at facilities in Queensland and South Australia, Orrcon distributes its products through twelve sites around the nation and has more than 500 staff.
The proposed acquisition would see BlueScope – the only domestic manufacturer of pipe and tube inputs (hot rolled coil, cold rolled coil and galvanised coil) – integrate into the manufacture of pipe and tube products and merge with Orrcon’s steel and tube distribution businesses.
In its statement, the ACCC says it considered whether or not BlueScope could use its position as the sole domestic supplier of some inputs to affect the supply of key inputs to rival steel manufacturers and steel and tube distributors amid concerns raised that anti-dumping provisions and proposed changes to steel industry related Australian Standards would impede the ability of these manufacturers to source alternative supply from overseas – especially in the Tasmanian market where there are fewer steel and tube importers compared with the mainland.
But it concluded the ability of rival manufacturers to bypass BlueScope and source inputs from offshore remained significant, and that a combination of higher profit margins on domestic sales and the company’s need to operate its ballast furnace at its Port Kembla steelworks at full capacity meant the company had the incentive to continue to supply its rivals.
“The ACCC concluded that rival manufacturers would likely be able to bypass BlueScope in the event of a foreclosure strategy by increasing the number of imported pipe and tube inputs they acquire” ACCC Chairman Rod Sims said.
“The ACCC formed the view that rival steel and tube distributors would continue to have alternatives to BlueScope in the supply of pipe and tube products, principally from manufacturer Australian Tube Mills and also through imports.”
When it announced the deal back in August, BlueScope said both Orrcon and Fielders were close to its core businesses and their integration with existing operations would boost efficiency and be earnings accretive following integration in FY2015.
An ACCC ruling with regard to the Fielders acquisition is expected on January 30th next year.