South Korean electronics giant, Posco has launched a bid to acquire steelmaker and iron ore miner Arrium Limited in association with commodities trader Noble Group.

The two companies have launched a bid at 75 cents per share with a combined value of around $1 billion. The value is about 39 per cent premium above closing price on Friday when the shares closed at 54 cents. The board of the Arrium has said that it will not accept the value because it undervalues the shares of the company.

On the other hand, state governments, unions and the Federal opposition have all welcomed the offer. Posco has said that it will turn around Arrium's steelmaking division with the use of new technology. Posco is aiming to control iron ore supply while Noble Group might take up marketing rights for Arrium's iron ore, which is currently held by BHP.

The acquisition will allow the South Korean steel giant to produce cheaper steels and better compete in the global markets. Arrium's output in expected to be 12 million tonnes by next year, which will make it the fourth largest iron ore exporter in Australia.