major shareholder reject bid

From Mining News:

Midwest's major shareholders snub Murchison bid

Colin Jacoby
Wednesday, November 07, 2007

MAJOR shareholders in takeover target Midwest Corporation have rejected Murchison Metal's all-scrip takeover bid for the company.

In a statement released today, Midwest's major shareholders - who own a combined 45% stake in the iron ore play - confirmed in writing that they believe Murchison's current offer "materially undervalues" Midwest relative to Murchison and that they don't intend to accept the offer.

Murchison's current offer for Midwest is one of its shares for every 1.08 Midwest shares, valuing the company at over $1 billion.

Midwest shareholders who have rejected the offer include Midwest directors Jesse Taylor, Dato David Law and Stephen de Belle.

The company believes any synergy benefits, which have not yet been quantified by Murchison, were unlikely to be achieved.

"Although Murchison has not been prepared to quantify the expected synergies, the value potential of these has been one of Murchison's key arguments for a combination," Midwest said.

"In our view, full delivery on synergies will not be achieved, unless Murchison acquires 100 percent control."

Midwest also stressed that since Murchison could not achieve the required 80% acceptances under the current offer, no capital gains tax rollover relief would be available to Midwest shareholders accepting the offer.

"Given the very strong performance in the Midwest share price, shareholders who accept the offer could get a very large tax bill."

Midwest added that the offer may not recognise the fair value of Midwest which would contribute 71% of the combined group's direct shipping ore resource but Midwest shareholders would only hold 31% of the group's shares.

The Midwest board is reviewing the Murchison offer and its recommendation to shareholders which will be included in the target's statement to be sent to shareholders in the coming weeks.

The news comes after Murchison raised concerns over Midwest's side-by-side analysis of both companies' assets in a presentation last week.

Midwest and Murchison are pitted against each other over the development of a deepwater port at Oakajee and associated rail infrastructure in Western Australia's Mid-West.

Shares in Midwest have risen from a closing price of $3.51 on October 9, the day before Murchison's initial announcement of a takeover bid, to today's closing price of $4.97, a 42% increase.

Meanwhile, Murchison's share price over the same period has fallen from a closing price of $5.08 on October 9 to today's closing price of $4.82, a 5.1% fall.