sinosteel digs a deeper mess

Sinosteel digs a deeper messFont Size: Decrease Increase Print Page: Print Kevin Andrusiak | April 25, 2008
THE cat is now oh so out of the bag for Sinosteel as it loses its way in the WA midwest.

Friday's brilliant piece by The Australian's national affairs correspondent, Jennifer Hewett, has revealed Sinosteel's true ambitions for the developing iron ore region.

Not only does it think it can fool the Midwest board and its shareholders into thinking its lowball $5.60 a share offer price is anything but a dusted off version of a previously rejected bid price for the company, it is now circling Midwest's regional rival, Murchison.

Or perhaps it has been doing more than just circling, given that there has long been speculation that Sinosteel has built up a minority stake in the iron ore hopeful to add to its 20 per cent stake in Midwest.

Hewett's yarn indicated that Sinosteel had approached the Foreign Investment Review Board to buy shares in Murchison after FIRB waved them through to move on Midwest.

It must be remembered that a foreign entity needs FIRB approval only if it plans to get a stake of greater than 15 per cent in a company.

In essence, you can probably take it as read that Sinosteel want to move on the whole damn lot, building its own mini-Manchuria in outback WA.

But its tactics to date have left a lot to be desired.

Firstly there were the ludicrous comments from company head honcho Huang Tianwen that the Sinosteel's unimaginative bid for Midwest was anything but hostile.

“I think it is not a hostile takeover - I think it would be more appropriate to call it a non-agreement takeover,” he told The Australian on March 31.

Huh? Maybe China is bringing its own new set of business-world lingo with its billions of investment dollars.

Secondly, what else did Sinosteel expect would happen to the relationship between Midwest and its supposed infrastructure partner Yilgarn when it launched its “non-agreement takeover”.

Yilgarn, backed by a range of Chinese players, is chasing the rights to build and own the $3 billion worth of railways and port infrastructure to unlock the region. But Yilgarn is still waiting for Midwest to nominate it to the WA government as its preferred tenderer against that of a consortium by Murchison/Mitsubishi.

The bids are due May 9 and Midwest wants to put it the nomination to a shareholder vote. You can bet your bottom dollar that Sinosteel's “non-agreement takeover” got something to do with the delay in nomination.

But wouldn't Sinosteel be demanding a shareholder vote if Midwest's major shareholder and favourite Sinosteel target, David Dato Law, was behind a consortium which also wanted to bid for the infrastructure rights.

The WA government - who is expected to decide just who will build the port - must surely be looking at the developing Midwest/Sinosteel mess with disdain, probably whispering under its breath that it has done all it can.

Midwest can ask for a delay to the May 9 deadline so that shareholders can vote, but is yet to do so. Whether the WA government would acquiesce is another matter altogether.

Certainly Yilgarn does not deserve to be dropped in the foul smelling brown stuff after all the hard work it has done in preparing its bid.

And it is hard to see just where Sinosteel would sit if it couldn't control the rail infrastructure and had to rely on others instead.

Before it wants to start digging the Midwest dirt, Sinosteel probably has to dig itself out of the created mess that it only has itself and its advisers to blame for.

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