Australia’s BlueScope and Japan’s Nippon Steel Corporation have agreed to form a new joint venture encompassing BlueScope’s ASEAN and North American building products businesses. Nippon Steel Corporation (NSC) of Japan will be the world’s second largest steelmaker following completion of its merger with Sumitomo Metals.

The new 50:50 joint venture, called NS BlueScope Coated Products, provides a strong platform to capture expected growth in the $40 billion per annum building and construction sector in ASEAN and North America. The JV will facilitate entry into new markets not currently accessible to BlueScope. For example, the JV will supply whitegoods manufacturers offering products to Asia’s fast growing middle class. The JV will also speed up entry into emerging markets in the ASEAN region.

NSC’s investment recognizes an agreed enterprise valuation for the JV of US$1.36 billion. BlueScope will receive approximately US$540 million in net proceeds through NSC’s 50% acquisition of BlueScope’s interest in the businesses after allowing for taxes, minority interests and transaction costs. BlueScope will continue to consolidate the business for financial reporting purposes. The cash consideration received from NSC will be recognized within equity, therefore no gain or loss on this transaction will be recorded in the income statement.

BlueScope Chairman Graham Kraehe AO, welcomed NSC’s significant investment. "It clearly highlights the long-term strategic value created by BlueScope over many years. It’s a great vote of confidence in our strategy, global reach, capabilities and our people. It will enhance BlueScope’s growth and opens an exciting new era for the company."

BlueScope’s Managing Director and CEO, Paul O’Malley, said "We chose to partner with NSC because it is one of the world’s largest and most innovative steel companies. NSC brings access to new technology and a broader range of customers in new product areas, including an established customer base of Japanese companies operating in ASEAN, which opens new market opportunities for NS BlueScope Coated Products.

"NSC is investing in BlueScope’s business to expedite expansion into this fast growing Asian region. Over many decades BlueScope has established the region’s pre-eminent metal coating and painting footprint, with well recognized brands, broad channels to market, and long-standing local relationships.

"Importantly, our two companies have worked together for many years and understand each other’s technical expertise and business approach. We have a 40-year association built on technology collaboration, with more than 65 projects completed together since 1970. So this joint venture starts with a solid foundation", said O’Malley.

NSC Representative Director and President, Mr Shoji Muneoka said, "NSC is delighted to be entering into this strategic partnership with BlueScope. This builds on our close relationship. The global building products business has strong momentum and is well positioned to benefit from future growth throughout Asia and the US. We look forward to working closely with BlueScope to expand the product and customer base to grow earnings and maximise value for both parties."

The joint venture will comprise BlueScope’s current building products businesses in ASEAN (Indonesia, Malaysia, Thailand, Vietnam, Singapore and Brunei) and North America (Steelscape and ASC Profiles). The footprint of this business also covers Myanmar, Cambodia, Laos and the Philippines. The business presently employs approximately 3,000 people.

NSC and BlueScope will each hold 50% of a new joint venture company, headquartered in Singapore. BlueScope will appoint the Chief Executive of NS BlueScope Coated Products. NSC will appoint the Chairman and a number of key executives to assist with business development and the introduction of new technology and products. The transaction is expected to complete in the March 2013 quarter, once regulatory approvals have been obtained. The JV does not include BlueScope’s building products businesses in Australia, China and India, or its Global Building Solutions business that operates across the world (including in ASEAN countries).

Mr O’Malley said, "This is a significant new platform to enhance our growth opportunities in some of the fastest growing markets in the world. The proceeds received from NSC will afford BlueScope further financial flexibility and balance sheet strength to continue to grow businesses delivering strong returns.

"NSC’s major investment in this part of BlueScope’s portfolio is a tribute to our reputation for leading products and strong brands, our extensive global networks and our channels to market, and the strong partnerships developed by our excellent people," said Mr O’Malley.

Credit Suisse acted as financial adviser and King & Wood Mallesons acted as legal adviser to BlueScope in relation to the transaction.