Adds bidder context in paragraph 5, investor reaction in paragraphs 7-8, 14-15; updates shares in paragraph 6

By Scott Murdoch and Christine Chen

SYDNEY, Feb 26 (Reuters) - Australia's BlueScope Steel BSL.AX rejected a A$15 billion ($10.7 billion) revised bid from SGH SGH.AX and U.S.-based Steel Dynamics STLD.O, sending its shares down almost 5% on Thursday, but said it was open to further talks.

BlueScope's board said it was willing to engage with the consortium on a bid that reflects "the fair value of BlueScope", compared with the revised A$34 per share offer, pressing for a better understanding of how its North American assets would be valued.

"The offer price is not sufficient for the board to recommend a scheme of arrangement to its shareholders," the takeover target said.

The bid's value is reduced to A$32.35, following a A$1 special dividend declared in January and BlueScope's A$0.65 per share interim dividend. BlueScope has said it intends to distribute a further A$1.35 per share to investors in 2026.

BlueScope has now knocked back five takeover attempts from Steel Dynamics, including two joint bids made alongside SGH.

BlueScope shares fell as much as 4.9% on Thursday, before recovering some ground to close 2.33% lower. The benchmark S&P/ASX200 .AXJO closed 0.51% higher.

"It's obviously negative in the short-term, there's no doubt about that. But BlueScope continues to have good operations and we're confident the price can materially increase over the medium-term," said Jamie Hannah, deputy head of investments at VanEck, a BlueScope and SGH investor.

"As shareholders in the company, we're not dissatisfied with them pushing for a higher price. BlueScope knows their long-term plans better than anybody else."

SGH declined to comment on BlueScope's statement. Steel Dynamics did not immediately respond to Reuters' request for comment.

A letter sent to SGH and Steel Dynamics from BlueScope chair Jane McAloon, published on the ASX, said the steel producer was willing to engage with the consortium if certain conditions were met.

McAloon said BlueScope needed to better understand the valuation that would be put on the company's North American assets given that business would be sold to Steel Dynamics as part of the process.

She added BlueScope was not willing to meet the consortium's proposal that the board needed to recommend the offer to investors before SGH and Steel Dynamics carried out due diligence on its target. The letter also asked for more details on the funding structure that would be used in the takeover.

"If you are able to address the matters we have raised in this letter including, importantly, increasing the value of your proposal for all BlueScope shareholders, the board is open to further engagement with you, including providing some due diligence information," McAloon said.

Greg Cassidy, a senior analyst at Milford Asset Management, a BlueScope investor, said he believed a deal could still be done as BlueScope's directors "haven't outright said no" to SGH and Steel Dynamics.

"BlueScope have given them a potential opportunity to say, 'Okay, well, let's chat about how you've come up with this price and we can work out some differences.'"

($1 = 1.4037 Australian dollars)

(Reporting by Scott Murdoch and Christine Chen in Sydney and Sneha Kumar in Bengaluru; Editing by Alan Barona and Stephen Coates)

((Sneha.Kumar@thomsonreuters.com))