A per­fect pur­chase

Townsville Bulletin - - NEWS -

Townsville THE sale – more point­edly, the pur­chase – of the Ar­rium steel group is one of those rare all- round good­news sto­ries.

It’s ob­vi­ously good news for the 5500 peo­ple who will con­tinue to have jobs – in­deed, now ac­tu­ally more se­cure jobs than they might have thought they had back even be­fore the com­pany’s fi­nances went to cus­tard.

It’s also good news for all the busi­nesses and their work­ers which do busi­ness with Ar­rium and its var­i­ous op­er­a­tions, whether as sup­pli­ers or cus­tomers, and not just in Whyalla but around the coun­try.

It’s good news – in­deed the best news – for Whyalla, which would have been turned into a ghost town oth­er­wise ( al­beit, per­haps only the first of many in Jay Weather- ill and Tom Kout­san­to­nis’s back- to- a 19th cen­tury- fu­ture state).

It is there­fore good news for the state and also – di­rectly and un­de­servedly, be­cause the pur­chase was no thanks to them – those two very same pol­lies. But it is also good news for the coun­try over­all that this busi­ness has a fu­ture in a global con­text.

That’s the key point and why I stressed that it was the pur­chase side of the deal that is the foun­da­tion of the good news.

A sale in iso­la­tion wouldn’t have guar­an­teed a fu­ture: the generic buyer could be ac­quir­ing it for the cor­po­rate equiv­a­lent of scrap.

This buyer is buy­ing to keep the busi­ness, well, in busi­ness – and shock catas­tro­phes aside, keep it in busi­ness at least well into the medium term. That’s say at least seven to 10 years.

You don’t out­lay $ 1.5 bil­lion- plus, maybe even $ 2 bil­lion- plus, as this buyer is do­ing, and out­lay it in the way it has – buy­ing the lot – un­less you in­tend to run the busi­ness.

This buyer in­tends to do ex­actly that and, crit­i­cally, this buyer knows ex­actly what it is do­ing.

The key thing to un­der­stand is that the buyer is not just spend­ing $ 1 bil­lion- plus – the price has not yet been dis­closed ( it will be) – to buy Ar­rium, it will also need to pump in an­other $ 500 mil­lion or so, and then count­ing, to re­cap­i­talise the busi­ness. That’s the real com­mit­ment to at least that medium- term fu­ture.

So if it’s pay­ing the banks $ 1 bil­lion, it’s com­mit­ting to at least $ 1.5 bil­lion. If it’s pay­ing them $ 1.5 bil­lion, it’s com­mit­ting to $ 2 bil­lion- plus.

The only peo­ple it is not good news for are the for­mer Ar­rium share­hold­ers. They will get zip, although the losses they will make on their shares will at least be for­malised and fi­nalised for tax claim pur­poses.

Fur­ther­more, they didn’t lose their money yes­ter­day. It went, in­stantly and com­pletely, 15 months ago when Ar­rium went belly- up; so in a bizarre sense, now that they can claim their tax loss it’s sort of a “good news” story even for them.

Those who think “banks are bas- tards” will see it as “good news”, be­cause the banks will lose some money. They are owed $ 2.8 bil­lion. They won’t be get­ting any­where near 100c in the dol­lar back.

How­ever, it’s ac­tu­ally even a “good news” story for them com­pared with what they were look­ing at when it all blew up. They could very well have faced los­ing closer to all of that 100c in the dol­lar.

Cru­cially, the deal is a done deal. It is sub­ject to only two con­di­tions.

The first is cred­i­tor ap­proval: they won’t just ap­prove it, they’ll snatch it. The sec­ond is FIRB, for­eign takeovers. Again, the Trea­surer will stamp “yes” on the pos­i­tive rec­om­men­da­tion from FIRB the mo­ment it hits his desk; maybe even while it’s in midair head­ing for his desk.

The Ar­rium steel­works in Whyalla, South Aus­tralia.


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