Stokes family scouts Whyalla steel mill as sale process heats up

The billionaire Stokes family has made an early move on the troubled Whyalla steelworks, with SGH Limited executives conducting a site visit ahead of the formal sale process.

SGH chief executive Ryan Stokes and chief financial officer Richard Richards spent two days in the remote South Australian town recently, getting a head start before sell-side adviser 333 Capital opens the data room for potential bidders.

The $20.6 billion conglomerate’s interest in the steel mill – once owned by fallen British industrialist Sanjeev Gupta and now in administration – represents a potentially left-field play for the industrial giant better known for its ownership of Boral and other building materials businesses.

Sources familiar with the visit said Stokes and Richards were conducting due diligence on the operations, though SGH has yet to decide whether to table a formal bid or which specific assets might interest them. An SGH spokesman declined to comment when contacted, The Australian Financial Review reported.

The steelworks, formerly known as OneSteel Australia and part of the collapsed Arrium empire, has been controlled by administrators KordaMentha since the South Australian government seized the plant in February. The facility came with nearly $1 billion in debts but also a $2.4 billion government rescue package.

BlueScope Steel, which has been providing technical advice to the administrators, and South Korea’s POSCO are widely seen as the most logical bidders for the assets. But SGH’s interest suggests the field could be broader than initially anticipated.

For SGH, the Whyalla plant represents an opportunity to establish itself as a domestic steel supplier at a time when US tariffs are threatening global supply chains. The asset, originally built by BHP in the 1960s, could potentially be acquired cheaply with government backing.

However, the steelworks have been chronic underperformers for decades and come loaded with significant liabilities – factors that would give any potential buyer pause.

At an investor day last week, SGH told shareholders it was hunting for M&A targets in industrials and energy that generate $100 million to $200 million in earnings and offer a “turnaround pathway within 3-5 years.” The Whyalla operations would certainly tick those boxes, though SGH indicated it was more likely to pursue opportunities within its existing portfolio.

The early interest from the Stokes camp adds another layer of intrigue to what is shaping up as one of the year’s most closely watched industrial asset sales.

Picture: credit GFG Alliance