The boss of a specialist alloy business has splashed out on a luxury South Perth apartment as a major US player has emerged on his company’s register.
The boss of a specialist alloy business has splashed out on a luxury South Perth apartment as a major US player has emerged on his company’s register.
Property records show interest associated with Alloy Steel International chief executive Steven Kostecki paid almost $7.8 million for a three-bedroom apartment in a new complex at 8 Parker Street overlooking the Swan River.
The purchase comes after a subsidiary of the $10 billion, Nadaq-listed Lincoln Electric Holdings emerged with almost 35 per cent stake in Alloy Steel, a family-controlled business started in the early 1990s by Mr Kostecki’s late father Gene after inventing the Arcoplate technology.
It also comes after the settlement of legal action which resulted from a 2021 deal in which the Kostecki family retook full ownership of the innovative Malaga-based business.
Attempts to reach Mr Kostecki for comment were unsuccessful.
The apartment sale settled in late March was another top price for the apartment block developed by dental surgeon Joe Muscara and architect John Colliere.
Only three sales for full floors have been higher at the complex, although it is understood an even more recent half floor sale of $8.5 million has reset the pricing level for the 14-level, 26-unit development.
Meryl Carter Luxury Real Estate agent Meryl Carter would not comment on the purchaser but said that Mr Muscara’s focus on luxury down-sizers had attracted the top end of the market at both 8 Parker and for pre-sales at 31 South Perth Esplanade which he is also overseeing.
Australian Securities and Investments Commission records show the real estate purchase coincides with The Lincoln Electric Company (Australia) taking control of Kostecki Brokerage, a company which controls about 35 per cent of Alloy Steel’s parent KG Aus Top Co.
Based in Ohio in the US, Lincoln Electric claims to be the world’s biggest designer and manufacturer of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products.
Alloy Steel’s core business is Arcoplate, which it started manufacturing in 1991 as a wear solution to improve the productivity of mining companies worldwide.
Its first export was in 1993, to the US.
According to Alloy Steel, Arcoplate is exported to more than 25 countries and has representatives, office locations and distributors in the US, Chile, India, and throughout Australia.
Alloy Steel’s annual report for the year ending September 30 2024 shows the company made a $6.9 million net profit on sales of $72.9 million, down significantly from the previous corresponding period when it earned a $15.9 million net profit from revenue of almost $68 million.
The accounts state that cost pressure eroded gross profit margin slightly to 43 per cent from 45 per cent, however the biggest blow to profitability came from a more than tripling of administrative costs to more than $20 million from $6.4 million.
The jump in administrative costs is unexplained in the report, but it does come after Mr Kostecki, his mother Maria Kostecki and Kostecki Brokerage settled a class action case through mediation at a cost of US$9.5 million, or about $14.5 million, a little over a year ago.
According to the court documents, that pay out represented a 75 per cent increase in the price paid to the minority shareholders.
The original sale, at $2.55 per share for 5,513,397 shares, or 34.7 per cent, valued the entire business at about US$40.6 million ($55 million) four years ago.
A 75 per cent increase on that would have valued the business at US$71 million, or about $95 million, at the time.
With the additional pay out last year, it means reacquiring the nearly 35 per stake has likely cost about $34 million, in two tranches over three years.
However it is not known what Lincoln Electric paid to secure the stake.
Alloy Steel’s latest annual report shows the business had net assets of almost $73.9 million, up from almost $67 million in the previous year.
The class action had been taken by shareholders aggrieved with a deal in which they were bought out of Alloy Steel by the Kostecki’s in 2021, in a merger arrangement which was effectively the reprivatisation of the business 20 years after a 2001 IPO had raised $310,000.
“Under the terms of the merger, the company’s [Alloy Steel’s] stockholders, excluding the Kostecki family and its affiliated entities, would receive $2.55 per share in cash, which implied a total enterprise value of the company [Alloy Steel] of approximately $40.6 million,” it was stated in Stipulation and Agreement of Compromise and Settlement document filed on December 11 2023 in the Court of Chancery of the US State of Delaware.
The Delaware court documents do not specify if those amounts are in Australian or US dollars. Only the pay out is specifically ordered in US denomination. However, it appears likely that all the figures in the court documents are in US dollars.
In addition, the Alloy Steel annual report states that at the September 30 balance date there was a loan receivable of $16.7 million from Kostecki Brokerage which, at that time, was an entity associated with Mr Kostecki and his mother Maria.
The loan receivable, which was interest free, had increased from $14.4 million at the end of the previous corresponding period, and was noted as a current asset whereas it had been non-current asset in the 2023 accounts.
ASIC records show Kostecki Brokerage changed its ultimate holding company to Lincoln Electric Holdings Inc in April this year, around the same time two Lincoln Electric executives, US-based management accountant Jigisha Chauhan and Singapore-based vice president Asia & Pacific Tsiolis Christos, were made its only directors.
Lincoln Electric has had interests in Australia since at least 2015 when it acquired Brisbane-based Specialised Welding Products. Loclur Engineering in Gladstone was acquired in April 2018 by SWP.
Lincoln Electric cites operations in the east coast towns of Gladstone and Newcastle in its latest annual report.
SWP claims to be at the forefront of welding and cutting technology.
