A quiet Sino-Japanese skirmish in the wild west of Western Australia over iron ore flared hotter Wednesday, with Japan-backed Murchison Metals launching a pre-emptive hostile takeover of smaller rival Midwest Corp.
Murchison’s offer, valued at up to 986 million Australian dollars ($887 million), came after the West Australia state government confirmed Monday that it had given up hope that the two competitors would work together and decided instead to choose only one to develop rail and port links to iron ore deposits that the two companies are developing in the remote midwest region of the state.
Ostensibly, the takeover battle is being fought among two mid-size Australian iron ore producers. Both, however, are deeply entwined with Chinese and Japanese interests that are competing for increasingly expensive metal resources.
Murchison is allied with Japan’s Mitsubishi Corp. (other-otc: MSBHY - news - people ), which agreed in June to a joint venture partnership in which it will buy half of Murchison’s iron ore production.
Murchison also has South Korea’s largest steel maker, Posco, as a major shareholder and a key customer.
Midwest is aligned with Chinese commodity trader Sinosteel Corp., which is backing its iron ore projects in the region. China passed Japan as the world’s largest buyer of iron ore in 2003.
Murchison is about 2.5 times larger than Midwest in terms of market capitalization.
A showdown was seemingly inevitable as neither side would like to see the other party win the government’s tender as the sole developer of the rail-port infrastructure project.
Midwest advised its shareholders to stay put before its board has a chance to review the merits of Murchison offer.
Paul Kopejtka, Murchison’s executive chairman, said merger talks between the two companies had failed and that recent events had also made the timing of the bid sensible.
“The value that can be generated by combining these companies will diminish over time as each company moves forward with separate development plans,” he said.
Murchison said combining it with Midwest would create Australia’s second-largest listed iron ore producer after Fortescue Metals and a major pure-play iron ore producer with targeted 2008 production of 45 million tons.
Its two-tiered offer offers a sizable carrot for Midwest to dissolve its planned joint venture with Sinosteel: an all-stock 4.70 Australian ($4.23) bid for each Midwest share, a 34% premium over its Monday close, or 986 million Australian dollars ($887 million).
However, if Midwest incurs a “material tax liability” by selling a 50% interest in its development projects in Weld Range and Koolanooka to Sinosteel, a lower offer would be on the table at 4.38 Australian dollars ($3.95) per share, a 25% premium, or 919 million Australian dollars ($826 million).
Murchison was up 2.17% early Monday afternoon at 5.19 Australian dollars ($4.68). Midwest soared 29.63% to 1.04 Australian dollars (94 cents).
No comments:
Post a Comment