Sinosteel's Midwest stake close to 45 pct - source

Wed 11 Jun 2008

Chinese metals trader Sinosteel is close to raising its stake in Australian takeover target Midwest Corp (MIS.AX: Quote, Profile, Research) to about 45 percent, a source familiar with the situation said on Wednesday.

"We're confident that by the end of this week we'll have some more acceptances," said the source. He added that the latest share purchases would take Sinosteel's shareholding to "the mid-40s", up from 40 percent last Friday.

He said the latest acceptances had been expected on Wednesday but had taken time to filter through.

But the source said Sinosteel did not expect to hit the 50 percent mark this week, anticipating more take-up of its A$6.38 a share offer in July, since some sellers would wait for the end of the Australian tax year at the end of June, rather than incur a hefty tax bill immediately.

Sinosteel is battling with Murchison Metals Ltd (MMX.AX: Quote, Profile, Research) for control of Midwest, an iron ore mining firm based in the midwest region of Western Australia. Both firms want to turn Midwest into a major producer of iron ore, a commodity that is in great demand from China's steel industry.

Murchison has proposed a merger with Midwest, an all-share offer which initially equated to a 10 percent premium to Sinosteel's terms but which has wilted as Murchison's share price declined. The merger was equivalent to only A$6.30 per Midwest share at the market close on Wednesday.

Midwest's shares closed at A$6.47, with support provided by its cash offer at A$6.38.

Murchison, with the support of Japan's Mitsubishi Corp (8058.T: Quote, Profile, Research), says its aim is to build the merged company into the main producer in the Yilgarn region of Western Australia, which could be transformed into a major iron ore province by a planned new railway and port.

Sinosteel also expects the region to flourish and wants Midwest to lead its development, as the Chinese company seeks stable supplies of raw materials to feed surging demand.

Murchison is being backed by its main shareholder, U.S. hedge fund Harbinger Capital, which also owns a stake in Midwest.

Source Reuters Hong-Kong

Back to news