Smorgon Steel said on Friday an independent expert's report had found a A$1 billion ($845 million) agreed takeover by OneSteel was in the best interest of shareholders.
The deal paves the way for consolidation among the country's three steelmakers after Smorgon and OneSteel reached an agreement with BlueScope Steel their larger rival.
BlueScope will sell its 19.9% stake in Smorgon to OneSteel and acquire Smorgon's metal distribution business.
The competition regulator approved the takeover earlier this month, subject to strengthened commitments from OneSteel about anti-dumping actions.
The takeover will be voted on by shareholders at a meeting on July 31.