Murchison Metals Ltd has vowed to stifle Sinosteel Corp's $A1.36 billion takeover bid for Midwest Corporation after the Chinese commodity trader refused to support a merger of the two iron ore companies.
Murchison on Monday terminated the planned merger with Midwest after failing to gain support from the iron ore company's major shareholder Sinosteel, China's second largest iron ore trader.
"We believe that there is potential for there to be greater value in remaining a shareholder of Midwest than accepting the Sinosteel offer," Murchison executive chairman Paul Kopejtka said in a statement.
The refusal by Murchison to accept the $6.38 cash per share bid for its 10 per cent stake will effectively block a compulsory takeover of Midwest.
Murchison and Midwest operate modest iron ore mines in Western Australia's mid-west region and want to develop much larger operations, depending on the construction of supporting infrastructure.
Sinosteel holds 45.58 per cent of Midwest, while Murchison's largest shareholder, Harbinger Capital Partners, has a 9.11 per cent stake.
Murchison proposed in May a reverse takeover for Midwest that was engineered to prevent Sinosteel, which at the time held 19.89 per cent of Midwest, from blocking the merger deal.
The reverse takeover was structured so that Midwest only required 50.1 per cent of votes cast in favour of the merger to approve the deal.
However, Sinosteel declared its takeover free of conditions and proceeded to raise its stake in Midwest.
Sinosteel launched a hostile bid for Midwest in March, valued originally 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, which Midwest said undervalued the company.
The Chinese trader, which has a 2.4 per cent stake in Murchison, sweetened the bid in April to $6.38 cash per share and declared the takeover offer unconditional last month.
Midwest shares closed unchanged at $6.38, while Murchison lost 10 cents to $2.90.
Source: The Melbourne Age
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