MURCHISON Metals unveiled today an agreed bid for Midwest, trumping a $1.36 billion bid from China's Sinosteel.
In a statement to the stock exchange, Murchison said the takeover proposal aimed to create a dominant iron ore producer in the mid-west region of Western Australia.
Midwest said its board unanimously accepted the offer.
Murchison has proposed the takeover via a scheme of arrangement, offering one share and an option on issue for every 0.575 Midwest shares.
The deal is valued at $7.17 per Midwest share, or $1.53 billion, higher than the $1.36 billion bid of $6.38 cash for every Midwest share from Sinosteel, China's largest trader of iron ore.
Midwest said it “unanimously recommends” the merger proposal based on the initial assessment of the offer, but said it would also “maintain its recommendation” of the Sinosteel offer while it assesses the implications of the proposal and “in particular market reaction”.
“The strategic logic of the merger is a compelling opportunity for Midwest and Murchison shareholders,” Midwest chief executive Bryan Oliver said in a statement.
On Friday, Murchison upped its stake in Midwest to 9.98 per cent, primarily through the $70.2 million off-market purchase of 11 million shares at $6.38 each, from 4.78 per cent.
The company was forced to scrap a $900 million all-scrip takeover bid for Midwest in February after failing to receive enough acceptances.
Sinosteel launched a hostile bid for Midwest in March, valued at $1.2 billion or $5.60 per share, after the two companies were unable to agree to terms on an earlier takeover proposal, also pitched at $5.60 a share.
Midwest said the first Sinosteel offer undervalued the company.
The Chinese trader, which holds 19.89 per cent of Midwest, sweetened the bid last month to $6.38 cash per share and gained the backing of the company.
A 10 per cent stake in Midwest would be enough to block a compulsory takeover of the company by Sinosteel.
The Chinese trader has also built up a 2.4 per cent stake in Murchison.
Midwest said the Murchison proposal was “compelling” and a merged entity would be a “dominant iron ore player in the mid west region” of Western Australia.
The company added a merged outfit would be also “well-positioned to pursue an acquisition strategy and drive regional consolidation”.
Murchison and Midwest operate modest iron ore operations in WA's mid-west region and are looking to develop much larger operations, depending on the construction of supporting infrastructure.
Both companies are in a trading halt.
Harbinger Capital the largest shareholder in Murchison with about a 20 per cent stake, said welcomed the agreed takeover offer.
“I have every confidence that this merger will deliver significant value for shareholders of both companies,” said Philip Falcone, the chairman of Harbinger.
AAP
GWR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
