Midwest deal is China's first hostile acquisition

By Fu Chenghao  |   2008-7-12  |     NEWSPAPER EDITION

SINOSTEEL Corp has gained control of Midwest Corp by securing more than 50 percent in the Australian iron ore company, marking a key step forward in China's first successful hostile acquisition of an overseas company.

Sinosteel raised its stake to 50.97 percent as of Thursday, it notified the Australian stock exchange yesterday, after fending off a rival bid from Murchison Metals Ltd.

Sinosteel is offering A$6.38 cash per share, or A$1.36 billion (US$1.3 billion), for all of Midwest, although Murchison said it wouldn't sell its 10-percent holding in Midwest after dropping its offer this week. Murchison had planned to merge with Midwest.

Sinosteel said yesterday it fully abided by international mergers and acquisitions rules and Australian regulations.

"This successful acquisition would play a key role in strengthening and deepening the economic and trade relations between China and Australia," it said.

The deal may be a sign of increasing sophistication in doing global M&As in China's corporate overseas acquisition history, which so far has focused on natural resources with the aim to supply the fast-growing economy.

Oil firm CNOOC Ltd failed in its US$18.5-billion bid in 2005 for Unocal Corp due to opposition by United States politicians. But the recent move by aluminum giant Chinalco which partnered Alcoa to buy 9 percent of mining giant Rio Tinto for US$14 billion showed progress, although it's only a minority stake.

Ronald Chao, a corporate finance partner at accountancy firm Deloitte, said Chinese firms still need more exposure in doing global M&As.