![British bidder Liberty House has bought the Arrium assets.](http://web.archive.org./web/20170705212623/http://www.afr.com/content/dam/images/g/o/1/b/d/h/image.related.afrArticleLead.620x350.gx4s7g.png/1499254952524.jpg)
British industrial firm Liberty House and its stablemate, SIMEC, aim to directly supply products from the Whyalla steelworks to its growing network of steel mills in the United Kingdom as part of an overhaul plan that includes cutting costs, modernising the plant and building a power station.
The British duo, bidding through the GFG Alliance vehicle, have signed a binding agreement with administrators KordaMentha to buy the Australian assets of Arrium after lodging its third offer on Tuesday night. It came after the preferred Korean consortium led by private equity firm Newlake Alliance squandered its status as preferred bidder after missing a deadline.
GFG Alliance had been an underbidder earlier in the process, but in a dramatic re-entry secured the nod of KordaMentha. The assets comprise the Whyalla steelworks, an associated iron ore mine in the nearby Middleback ranges, electric arc furnaces and mini-mills in Sydney, Melbourne and Newcastle, and a national steel scrap and recycling business which handles about 1.2 million tonnes of ferrous scrap.
Liberty House executive chairman Sanjeev Gupta said the acquisition of Arrium was expected to secure the jobs of about 5500 Australian workers. The Whyalla steelworks and mine employs 3000 workers and contractors. Whyalla Mayor Lyn Breuer said it was a huge relief for the regional town of 22,000 people, about 380 kilometres north of Adelaide. "It certainly does lift a cloud over Whyalla," Ms Breuer said. "People haven't been spending and a few businesses have gone under," she said, of the 15 months of uncertainty which would now end.
Arrium's bankers, owed a combined $2.8 billion, put the company into administration in April, 2016 with total debts at $4 billion.
KordaMentha's Mark Mentha said the revised GFG option was "superior" to the conditional offer from the Korean consortium of Newlake Alliance and JB Asset Management.
Liberty House and SIMEC are proposing a modernisation of the Whyalla steelworks and a power plant, which also would feed extra electricity back into the fragile South Australian power grid. They have been at the forefront of a partial revitalisation of the British steelmaking industry over the past few years, buying troubled assets in the UK and injecting fresh capital into them.
Mr Gupta said it was a landmark deal that would establish the GFG Alliance "as a major participant in Australia's industrial landscape".
"We have a vision to create a vertically integrated and sustainable industrial business that encompasses mining, metal recycling, primary metal production, engineering and distribution, and which also includes the use of renewable energy, consistent with our Greensteel strategy," he said.
GFG's development director Michael Morley said on Wednesday the firm had a comprehensive plan to overcome the Whyalla steelworks' operational and financial challenges. "Our plan focused on reducing the cost of iron ore feed, targeted modernisation investments, energy generation, expanding production and creating high value export opportunities," he said. Mr Morley in a previous role led the revitalisation of the Port Pire lead smelter in South Australia on behalf of European metals firm Nyrstar.
Mr Mentha said the revised offer on Tuesday night was a better outcome when all factors were considered.
"After assessing all factors, including timeframes to complete a sale, the administrators and sale advisers Morgan Stanley, decided the GFG Alliance offer was superior to the conditional offer of the Korean consortium with whom we were negotiating," Mr Mentha said in a letter to Arrium staff on Wednesday morning.
Arrium's executive general manager of the Whyalla Steelworks, Theuns Victor, said in a note to staff that GFG had "an excellent track record in turning businesses around" but that workers needed to ensure the plant was able to "deliver on our plan and meet our production targets".
Federal Treasurer Scott Morrison said it was a good outcome and the formal conditions on proceeding quickly through the Foreign Investment Review Board process had been agreed.
South Australian Premier Jay Weatheriill said he had spoken to Mr Gupta on Wednesday morning to offer his congratulations and to reaffirm the state government's commitment to the long-term future of the Whyalla operations. The SA government has promised $50 million in cash to a new buyer of the Whyalla steelworks. "This is a great victory for Whyalla," he told reporters.
Liberty House and SIMEC, which was established by Mr Gupta's father, Indian businessman Pardaman K. Gupta in the mid-1960s, runs shipping, steelmaking, trading, commodities and energy businesses. LIberty and SIMEC have a combined revenue of more than $11 billion annually. Sanjeev Gupta said in December, 2016 on one of his first visits to the Whyalla operations that he couldn't understand why Australia had never become a powerhouse in the steel industry because it had all the raw materials and major iron ore mines.
The Korean consortium of Newlake Alliance and JB Asset Management had signed a deal with Korean steelmaker POSCO where it intended to use POSCO's patented Finex steelmaking technology and also build a 200-megawatt power plant in a combined $US1 billion ($1.32 billion) investment at the Whyalla steelworks. They were anointed as preferred bidders in mid-June. But the British duo then lobbed a second, higher bid a day or so later to try and re-enter the process, but KordaMentha insisted the negotiations were exclusive still. That changed when an exclusivity period expired, allowing the British firms to make a third and higher offer, which was accepted.
Australian Workers Union national secretary Daniel Walton, said the GFG Alliance had a strong track record in the United Kingdom for doing the right thing in the corporate world.
The AWU has 2,000 members working for the various Arrium businesses, and is one of the representatives on the committee of creditors, which also includes Australia's big four banks, ANZ, CBA, NAB and Westpac, Spanish bank BBVA and mining contractor Bis Industries.
"They have invested strongly in heavy industry in Europe and the UK and it is this mindset they will bring to Australia," Mr Walton said.