BlueScope agreed to buy the remaining stakes in North Star from Cargill

Australia's largest steelmaker, BlueScope Steel Ltd. announces that the company agreed to buy another 50 percent shares in their US joint venture company, North Star from the US Cargill Inc. The news comes as a shock to some analysts as current uncertainty in commodities could lead the business to a loss for the next quarter.

According to Bloomberg, BlueScope agreed to buy the remaining shares for $750 million giving the company a full ownership of North Star. Besides BlueScope, another company had offered Cargill to buy the shares, however, considering the fact that BlueScope is the main partner giving the company its full right to buy the shares.

The move is expected to boost company's cash flow and earning in the long run according to the company's spokesperson. As cited by CNBC, the company said that "It is centrally located within a large scrap pool, operates close to its core markets, has low conversion costs and benefits from a highly motivated and focused workforce."

Through this deal, Cargill is officially out of the steel production investment as reported by The Wall Street Journal. The company announces in a statement that despites the decision, it will still continue to trade, distribute, and process steel related products through its remaining mill.

Cargill's vice president of strategy and business development, Peter Hawthorne said that the move is a must to ensure the company able to survive in current economic condition especially after it had reported a decline in its third-quarter earnings. According to Hawthorne, "We have chosen to sell our interest in the joint venture to redeploy this capital elsewhere in Cargill's portfolio, and are confident in the team's continued success under new ownership."

Previously, BlueScope has been requesting the Australian government to defer A$60 million in payroll tax after the company has been struggling to gain profit due to weak demand in China. Besides that, the company also has been seriously reducing its production cost by laying off around 500 jobs in its Australian mill.

According to the company's spokesperson, they have managed to reduce the operating cost by $60 million through the exercise. Despite the acquisition, BlueScope will still producing steel in its mill in Australia and not in the US as the cost is higher there.

The news also helps to boost the company's shares by 12 percent in early trading in the Australian market. BlueScope also announces that it is expecting a higher first-half earnings for the next quarter to about A$50 million.