BlueScope and Nippon Steel have announced a US$1.36 billion coated products joint venture.
According to BlueScope, the 50/50 JV is designed to "provide a stronger platform to capture higher value adding growth in existing markets".
The company went on to say that the creation of this new entity, known as NS BlueScope Coated Products, will also allow it to enter new markets such as "home appliance and whitegoods manufacturers in Southeast Asia".
"The JV will also speed up entry into emerging markets in the ASEAN region," it added, stating that it will lead to opportunities such as the "development of new demand for non-automobile applications such as agriculture and energy related applications".
This move is expected to ease some of the company's debt burden, with the company seeing a massive jump in its stock price following the announcement, shooting up yesterday from 26 cents per share up to 40 cents per share.
BlueScope will receive US$540 million in net proceeds thanks to the joint venture.
Paul O'Malley, BlueScope's CEO, explained that "we chose to partner with NSC because it is one of the world’s largest steel companies [and] 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".
It focused on the coated products business as prior to the joint venture BlueScope was already considering an expansion of its downstream manufacturing facilities in domestic markets within this space.
NS BlueScope Coated Products is expected to deliver between US$30 to $75 million EBITDA above existing business growth profiles by 2017.
Thailand will be one of the joint venture's key markets, with around 70% of revenues expected from this region, followed by Vietnam at 15%.
The joint venture will exclude the two companies automotive segments, and will not include BlueScope's building products businesses in Australia, China and India, or its Global Solutions business.