China's Sinosteel set to snap up Australian miner Midwest

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30 Apr 2008

Australian iron ore miner Midwest said on Wednesday it had accepted an improved takeover offer from China's Sinosteel, as the resource-hungry Asian giant moves to secure raw material supplies. Midwest's board backed the offer of 6.38 dollars per share, which values the firm at 1.36 billion dollars (1.27 billion US), in a statement to the Australian Securities Exchange late Tuesday. Midwest had previously rejected an offer at 5.60 dollars per share but could now become the first Australian resources firm taken over by a Chinese state-owned entity if shareholders fall in line with the board.
Sinosteel's revised bid was "an attractive offer for Midwest shareholders, providing the opportunity for certainty and transparent value in the current volatile sharemarket," the board said.
The bid needs 50.1 percent approval from shareholders to proceed. Sinosteel previously announced that Australian regulators had cleared the bid.
Australian Treasurer Wayne Swan said he was not concerned at moves by Beijing-owned firms to buy up Australian resource companies, although he said they could expect the same scrutiny as for any other foreign investment deal.
"Chinese investment has got a role to play in this country but we've made it very clear when it comes to foreign investment from Chinese government entities that we will apply our national interest criteria as we do in all other cases," Swan told Sky News.
"We think it's important that investment is competitive, that investment is non-strategic, and that investment is in our national interest."
UBS said that the Sinosteel bid represented fair market value.
"Given that it now provides full value to shareholders immediately and effectively eliminates all the risks associated with exploration and development, we believe the offer is fair," it said in a client note.
The Australian Financial Review welcomed Sinosteel's investment, describing it as China's first winning hostile takeover bid in the world after the US Congress in 2005 vetoed a bid for oil company Unocal by China's CNOOC.
China National Offshore Oil Corporation (CNOOC) is China's largest offshore oil producer.
The Review said in an editorial that the bid was prompted by China's worries that BHP Billiton's proposed takeover of fellow Anglo-Australian mining giant Rio Tinto would create a behemoth with too much control of iron ore prices.
It said the level of China's concern was evident in Rio's and BHP's dispute with Chinese steel producers over escalating iron ore prices.
"The stand-off over prices and the willingness of the government-backed Sinosteel to rapidly enter the Australian minerals market indicate the level of determination of Beijing's bureaucrats to plan for economic growth and for the materials the nation needs to sustain its growth," the editorial said.
Another Australian iron ore miner, Murchison Metals, revealed on Tuesday that Sinosteel had acquired 2.4 percent of its shares.
Junior miner Apollo Minerals also revealed Tuesday that an unnamed Chinese iron and steel group had declared its intention to lift its stake in the company from 12 percent to 19.9 percent.
China's state-owned aluminium giant Chinalco and US-based Alcoa in February purchased a nine percent stake in Rio, a move widely seen as an attempt to block any merger with BHP.
Midwest shares closed up 14 cents at 6.24 dollars after resuming trading following the announcement, which came after market the closed Tuesday.

Source: AFP