MARKETS SPECTATOR: Arrium fizzle

Sellers have hit Arrium shares for six this morning as bidders POSCO and Noble Group have said they will walk away from the deal after the Arrium board rejected a revised takeover bid.

South Korean steel producer POSCO and commodities trader Noble Group made a second, highly conditional cash offer for Arrium of $0.88 per share, which represented a 17 per cent premium over the consortium's initial bid.

Subsequently, this then triggered a downgrade of the stock from Deutsche Bank.

"Given Arrium's debt position, the revised offer only represents an increase to the enterprise value of 5.5 per cent. While we could not completely rule out the prospect of a higher offer, we note the consortium outlined it will 'cease engagement with the Arrium board', thus significantly reducing the likelihood of another offer,” the bank said in a note to clients.

"Therefore, we reduce our recommendation to sell as we believe in the absence of the offer, Arrium's share price should trade in line with our target price, which incorporates a discount given its debt position.”



Source: Iress

So it's back to the drawing board for Arrium shareholders, with its shares once again at the mercy of the market. Given the dire state of the global steel industry, it certainly doesn't bode well for shareholders looking for a quick turnaround in the absence of a new predator.