SHANGHAI (Interfax-China) -- Sinosteel Corp., one of China's largest iron ore traders, is poised to wholly acquire Australian iron ore miner Midwest Corp. Ltd. [ASX:MIS] through a revised bid of A$1.36 billion ($1.27 billion), after the company's directors unanimously recommended that shareholders accept the new offer, an industry analyst told Interfax today.
"Sinosteel's conclusion of China's first hostile takeover of an Australian resources company, Midwest, is just a matter of time, as it has won Australian FIRB approval and has now received the nod from Midwest's directors," Yu Liangui, an analyst from Mysteel Information, said.
Midwest announced yesterday that its directors have unanimously recommended that shareholders accept Sinosteel's increased offer of A$6.38 ($5.96) per share, compared to previous offer of A$5.60 ($5.23) per share.
The increased offer, which will remain open until June 5, 2008, is still subject to a minimum 50.1% shareholder approval and requires the absence of a higher offer.
"Should the offer not pass the 50.1% shareholder approval threshold, Sinosteel is expected to walk away from the deal. Sinosteel is looking to secure resources, and won't be satisfied unless it can control the company," Yu said.
The new offer represents a 13.9% premium to the previous offer and a 53.7% premium to Midwest's close price on the Australian Stock Exchange (ASX) on March13, 2008, one day prior to Sinosteel's offer.
Sinosteel also reiterated its intention to support Yilgarn Infrastructure Ltd. for its bid for the proposed Oakajee port and rail infrastructure project, honoring existing pledges.
Midwest chairman Jesse Taylor said the A$6.38 ($5.96) per-share cash offer will be attractive to Midwest shareholders, as it provides an opportunity for certainty and transparent value in the current volatile share market.
Midwest directors also explained their recommendation that shareholders reject the previous A$5.60 ($5.23) offer by saying that they did not believe it to be the company's final offer, which was inadequate and opportunistically timed to secure control of Midwest, and that it failed to recognize the full potential of Midwest's projects in a period of high iron ore demand.
Sinosteel, which currently holds a 19.89% stake in Midwest, has received approval from Australia's Foreign Investment Review Board (FIRB) for the takeover.
Midwest owns three principal iron ore mining assets in Western Australia, including the Koolanooka/Blue Hills Project, the Weld Range Project and the Koolanooka Magnetite Project. The Weld Range project has a minimum designed output of 15 million tonnes of ore per annum over a 15 year-period, and is scheduled to commence operations in early 2011.
Sinosteel has worked closely with Midwest to fund the exploration and development of Midwest's Weld Range hematite iron ore project and Koolanooka magnetite iron ore project since 2005.
Midwest initially received Sinosteel's non-binding proposal to fully acquire the company at a per-share price of A$5.60 ($5.23) on Dec. 7, 2007.
Sinosteel's proposal also outbids a previous takeover move from Murchison Metals Ltd. in October 2007. Murchison closed its offer for Midwest on Feb. 6, 2008, with no realistic prospect of reaching an agreement. Sinosteel currently holds a 2.4% stake in Murchison.
Midwest's stock trading closed at A$6.10 ($5.70) on the ASX on Monday, up 4.81% from the previous trading day. The company's stock suspended trading yesterday, pending the release of an announcement likely to impact the takeover.
(c) Interfax-China 2008. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at david.harman@interfax-news.com.
