Sinosteel makes A$1.2bn hostile bid for Midwest

"It's time Midwest shareholders had the opportunity to decide for themselves the value of their investment in Midwest."

Tianwen Huang, Sinosteel president

China's state-backed Sinosteel Corp (中國中鋼) yesterday launched a A$1.2 billion (US$1.1 billion) takeover bid for iron ore miner Midwest in the first hostile approach by a Chinese company for an Australian firm.

Sinosteel, China's No. 2 iron ore importer, said it is offering A$5.60 for each Midwest Corp Ltd share -- 35 percent more than Midwest's closing price on Thursday.

Midwest shares surged more than 30 percent yesterday to as high as A$5.48 before closing at A$5.43.

"It's time Midwest shareholders had the opportunity to decide for themselves the value of their investment in Midwest," Sinosteel president Tianwen Huang (黃天文) said in a statement.

The bid underscores China's eagerness to gain a foothold in Australia's booming resource sector as demand and prices for raw materials surge, and reflects Beijing's worldwide efforts to ensure that China gets the resources it needs to continue its runaway economic expansion.

China overtook Japan last year to become Australia's largest trading partner, and its voracious appetite for coal, gas and other resources has fueled Australia's unprecedented 17 successive years of growth.

News of the bid came as Australia's central bank chief said that China is a key part of a fundamental shift in the structure of the global economy, and that its influence was not likely to abate anytime soon.

"All the indications are that the rise of China is not just a cyclical event, but a structural change of the first order," Reserve Bank of Australia Governor Glenn Stevens said in a speech published yesterday on its Web site.

While China's growth rate in recent years of around 11 percent would slow "at some point," the country's economy still had years of strong expansion, he said.

Sinosteel already holds a 19.9 percent interest in Midwest, which is planning a project that would produce 15 million tonnes of iron ore a year in Western Australia state to shore up its iron ore supply.

The government's Foreign Investment Review Board has already approved the offer, Sinosteel said.

Australian Prime Minister Kevin Rudd, a former diplomat and China specialist, did not comment yesterday on the bid, but has said previously his government would block any foreign takeover that is not in Australia's national interest.

Midwest advised its shareholders to take no action until the company has had time to consider the bid, and reminded shareholders it rejected as too low an informal bid from Sinosteel in December at the same share price.

Several Chinese steelmakers have formed joint ventures or bought into other Australian iron ore projects in moves interpreted as attempts to provide China with alternatives to resource giants Rio Tinto and BHP Billiton.

BHP Billiton has launched a US$147 billion bid for Rio Tinto that has concerned Chinese steelmakers who worry that, if the deal goes ahead, the resulting mining behemoth could have too much control over prices.

Sinosteel signed a joint venture with Rio Tinto subsidiary Hamersley Iron in Western Australia in the 1980s, giving it "the track record, financial strength and technical expertise to develop and operate large scale mining projects," Huang said.