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Mergers, Acquisitions and Takeovers Case Study

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Case Title:

OneSteel – Smorgon Steel Merger: The Challenges Ahead

Publication Year : 2007

Authors: Vijay Pratap Rai, Amy Sonpal

Industry: Minerals, Metals and Mining

Region:Australia

Case Code: MAA0100A

Teaching Note: Available

Structured Assignment: Available

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Abstract:
OneSteel was a major steel player in Australian domestic market with an estimated market share of 30%. Smorgon Steel was also a major player in the Australian steel industry and a key contributor to the Australian economy. Their financial operation showed that it was a well defined group with emerging economic growth.

The merger of OneSteel and Smorgon was expected to create successful leadership position in Australian steel industry. The proposed merger was small on a global scale but accountable for about 35% of Australia’s production. The merger was consistent with the global trend of consolidation in the international steel sector.

The case discusses about OneSteel and Smorgon Steel’s plans to combat competition from their main rival BlueScope. BlueScope Steel’s key potency included low-cost operations, strong brands, leading domestic market positions, and a growing presence in the markets of Asia. The brands of BlueScope Steel were market leaders in Australia and New Zealand along with strong presence in Asia. BlueScope had spent more than $350 million to acquire 20% stake in Smorgon.

The case ends with a debate whether the merger of OneSteel and Smorgon would generate enough synergies for them to sustain competition. The merger would reduce the number of leading steel industry players and help eliminate competition from the Australian steel industry. Whether the merger would provide value or prove costly for the industry as a whole?

Pedagogical Objectives:

  • To understand the dynamics of the Australian steel industry
  • The impact of the merger of two industry giants on the industry
  • The post merger synergies to withstand the competition
  • To discuss the rationale behind mergers.

Keywords : Mergers,Acquisitions,Alliances Case Study;Steel industry; Restructuring; Technological leadership; Core Competency; Reinventing vision; Merger & Acquisitions; Strategic Alliances; OneSteel; Smorgon

Contents : 
Global Steel Industry
The Australian Steel Industry
OneSteel and Smorgon Steel: Blue Print of the Merger
The Australia Competition and Consumer Commission
BlueScope Steel-The Impending Competitor
Global Steel Capacities
Vertical Integration of OneSteel’s Australian Operations

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