Is BlueScope Steel a Buy After Rejecting Fourth Takeover? $438M Dividend Adds to the Debate

BlueScope Steel (ASX: BSL) rejected a A$13.2 billion takeover offer last week from US steelmaker Steel Dynamics and Kerry Stokes-controlled SGH. Days later, the company announced a A$438 million special dividend. The timing raises an obvious question: is this smart capital management or a calculated defence move?

Shares have since climbed above A$31, surpassing the rejected A$30 offer price, early validation for the board's stance.

The answer matters for investors weighing ASX steel stocks and the consolidation wave sweeping global steel markets.

Why Foreign Buyers Want Australian Steel Assets

The global steel industry is going through a major shake-up. Chinese steel demand continues falling, dropping around 2% in 2025 according to the World Steel Association. Meanwhile, trade barriers are reshaping where steel flows globally.

In the United States, Section 232 tariffs have doubled to 50% on most imported steel, creating a protected market where prices sit around US$950 per ton, roughly double Asian prices. These conditions make US-based steel assets extremely valuable.

This explains the consolidation rush. Nippon Steel completed its US$14.9 billion acquisition of US Steel in June 2025. Cleveland-Cliffs bought Canada's Stelco for US$2.5 billion. Now Steel Dynamics wants BlueScope's North American operations.

BlueScope's North Star steel mill in Ohio operates at full capacity and sits approximately 80 kilometres from Steel Dynamics' nearest facility. For Steel Dynamics, acquiring these assets would expand its footprint in a tariff-protected market.
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The BlueScope Board's Valuation Argument

BlueScope's board has rejected four approaches since late 2024. Previous offers came at A$27.50 and A$29 per share before the latest A$30 bid. Each time, the board argued that the offers significantly undervalued the company.

Chair Jane McAloon was blunt, describing the consortium's proposal as an attempt to acquire BlueScope's assets cheaply.

The board points to several supporting factors. BlueScope's North American operations generated over 40% of the company's revenue in fiscal 2025. The A$2.3 billion capital investment program, nearing completion, should boost earnings by around A$500 million annually by 2030. Property assets, including rezoned land holdings, offer substantial unrealised value. The company recently sold 33 hectares at West Dapto for A$76 million.

However, BlueScope faces headwinds. Fiscal 2025 sales fell 4% to A$16.3 billion amid weak demand and global uncertainty.

What the Dividend Really Signals

The A$438 million special dividend (A$1.00 per share, fully unfranked) comes from specific asset sales rather than operating cash flow. These include the A$167 million sale of BlueScope's Tata joint venture stake and property realisations expected to release around A$200 million through fiscal 2026.

The company stated the dividend choice was driven by regulatory constraints. An on-market buyback was unavailable due to ongoing corporate activity, making the dividend the only capital return option.

Morningstar analyst Esther Holloway told AAP she viewed the payout as straightforward capital management following asset sales, without reading takeover implications into the timing.

That said, SGH and Steel Dynamics specified their A$30 bid would drop by any dividends paid after December 12. The A$1.00 payout effectively reduces their offer to A$29, a level already rejected twice.

Key Takeaways for Investors

• Takeover pressure likely continues. SGH and Steel Dynamics haven't withdrawn. Global consolidation trends and protected US market conditions make BlueScope's assets genuinely attractive.
• Capital returns are accelerating. BlueScope targets returning at least 50% of free cash flow to shareholders. With capital expenditure dropping A$500 million from fiscal 2027, cash generation should strengthen.
• Steel sector dynamics remain complex. Global demand is stabilising, with the World Steel Association forecasting 1.3% growth in 2026. However, overcapacity and trade policy uncertainty cloud the outlook.

For investors seeking ASX steel exposure, the BlueScope situation highlights both opportunity and risk. Premium assets attract buyers, but rejecting multiple bids means shareholders must trust management's standalone valuation.

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