More hostile bids from China ahead Font Size: Decrease Increase Print Page: Print Michael Sainsbury | April 01, 2008
CHINESE minerals trader Sinosteel has signalled that companies from the world's emerging economic superpower are gearing up to take the gloves off and make a more aggressive play for Western corporations.
The Beijing-based group lodged its bidders statement yesterday for its rare $1.2 billion hostile tilt at West Australian iron ore hopeful Midwest.
But the document contained little beyond the confirmation of an all-cash bid, a basic description of Midwest and Sinosteel's operations, and an outline of the risks faced by stock holders.
Sinosteel last week began its campaign to convince shareholders by using the group Global Proxy Solicitations.
It also slammed escalating iron ore prices, which have risen every year for the past six years, as it prepared for another annual increase of at least 71 per cent for the steelmaking mineral.
Sinosteel president Huang Tianwen said that if Sinosteel failed in its tilt at Midwest, that would not stop it from it making similar bids either here or elsewhere.
"Every company cannot say it will be always 100 per cent successful," Mr Huang said.
"Even for Sinosteel in this kind of takeover there are two outcomes. For other companies in China, it's the same. Whether it is successful or not it will not affect Sinosteel in the future."
Mr Huang said that more hostile takeovers in future by Chinese companies would be "quite possible and quite normal". On March 14, Midwest told shareholders to take no action until it had an opportunity to consider the offer.
It has yet to issue a formal recommendation to its shareholders. Sinosteel has ignored a call by Midwest on March 19 to raise the $5.60-a-share bid to at least $7 a share, valuing Midwest at $1.49 billion. At $7, millions of options for Midwest's non-executive shareholders vest at a strike price of $5.60 -- effectively a $1.40-per-share handout.
"In the past, almost 20 per cent of shareholders have already sold their shares to Sinosteel at prices below $5.60," Mr Huang Tianwen said. "As far as the project of Midwest is concerned, there should be some substantial risks to the project. It will take time, probably two or three years, so such kinds of risk and such kind of situation should be reflected in the valuation.
"They (the board) hope to increase this price which is understandable, it is normal.
"Because we have participated and co-operated with Midwest for almost two years, we believe that the price is reasonable and we will be successful in taking over at this kind of price."
Sinosteel has had a joint exploration agreement with Midwest since 2005 to explore one of its sites, a deposit of haematite (high-yielding iron ore with a content of more than 60 per cent) at Weld Hills.
But Midwest has consistently argued, since rejecting an indicative offer by Sinosteel in December, that the company is only valuing the more advanced projects at Weld Hills and not the group's five other projects, which are in earlier stages.
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