Offer For Midwest Is Final: Sinosteel
The Age
Thursday May 29, 2008
NOT everything surrenders and falls in front of the Chinese resources juggernaut, not initially at least. Just ask Sinosteel.
Out of frustration with the Midwest and Murchison Metals merger proposal, it has declared that its conditional $1.3 billion or cash bid of $6.38 a share for Midwest is now final."After careful review, we have determined that $6.38 is the maximum we are willing to pay," the Chinese group said. And in an attempt to convince Midwest shareholders that they would be better off taking the cash offer rather than throwing their lot in with Murchison, Sinosteel warned that we were in an "uncertain environment".Most in the market had assumed that Sinosteel would move to put its bid for Midwest beyond doubt by increasing its offer and knocking out the competing merger proposal, announced earlier in the week, which involves a reverse-takeover scrip offer that implied a value for Midwest of $7.17 a share. Sinosteel is a 19.89% shareholder in Midwest. Its president, Tianwen Huang, said he was of the view that Midwest shareholders "would find the certainty of cash attractive compared to the uncertainty" of the merger proposal and the "uncertain value inherent in the conditional scrip terms of the Murchison proposal". While the bid from Sinosteel as it stands is final, its early declaration that it won't be paying more was widely viewed as a tactic designed to prevent it bidding against itself. That is because without the early declaration, the speculation that it could increase its Midwest offer would continue. As it was, there was heavy trade in Midwest shares yesterday but it managed a 1? increase to $7.04. Murchison was 9? weaker at $4.14. There was a view that while Sinosteel was not prepared to bid against itself, it could well be planning to come back with a bid for the merged group - the potential producer of 45 million tonnes of iron ore annually from the combination of their interests in Western Australia's mid-west region. But that view is at odds with Sinosteel's statement that it believes the merger proposal is unlikely to proceed. If its own cash bid fails for a stand-alone Midwest, Sinosteel will have to wait six months before coming back with a new offer that may or may not have the benefit from its perspective of the "uncertain environment". Sinosteel said one reason why it believed the merger proposal would fail was because Midwest directors had not committed to vote in favour of the proposal.
© 2008 The Age