Shares in Steel & Tube fell 6.6 per cent after ASX-listed mining and minerals group, Arrium said it will sell its 50.3 per cent stake in the local construction and materials supplier for about $91.2 million.
The stock fell to $2.26 from $2.42. It has gained 17 per cent this year and is rated an average 'hold' based on three analyst recommendations compiled by Reuters.
"The way the market has been performing over the last few weeks means it will be well supported by investors as they trace higher dividend yield," said Grant Williamson, director at Hamilton Hindin Greene.
The Australian company, formerly known as OneSteel, appointed an investment bank to underwrite and manage the sale of its Steel & Tube stake at $2.05 a share, it said in a statement. That's a 15 per cent discount to the Steel & Tube's closing price yesterday. It expects retail and institutional investors will buy the shares, and will use the cash to cut debt.
Steel & Tube chief executive Dave Taylor said he expects Arrium to remain a key supplier for the firm.
"This is a positive development for Steel & Tube providing greater liquidity in the trading of Steel & Tube shares," Taylor said.
In late 2008 Arrium made a tilt to buy the remaining stake in Steel & Tube, offering $4 a share, but later gave up when it became clear world markets were set to plunge.
This month, Arrium rejected a A$1 billion t bid by an Asian consortium Steelmakers Australia last week, that was led by Hong Kong commodities trader Noble Group and South Korean steel firm POSCO.
Arrium's Steve Hamer has resigned from the Steel & Tube board, effective immediately. Arrium-appointed Dean Pritchard will stay on the board and relinquish the chair to John Anderson.
In August, Steel & Tube reported a 23 per cent fall in annual profit to $13.1 million as dwindling demand and stiff competition squeezed margins. Sales rose 5 per cent to $405.4 million.
ASX listed Arrium shares last trade at 78.7 Australian cents and have gained 17 per cent so far this year.