China’s leading steel company Sinosteel succeeded in its bid to gain control of Australian iron ore miner Midwest. Stock exchange documents show it now has a majority stake in the target company.
Sinosteel bid A$6.38 ($6.12) cash a share for Perth-based firm. It now owns 50.97 percent of Midwest’s stake, it said in an announcement filed to the Australian stock exchange on Friday.
Sinosteel’s A$1.36 billion ($1.3 billion) offer for the Australian company represents another large acquisition in China’s mining resources sector. In February Aluminum Corp of China, together with Alcoa bought a 12 percent stake of global mining giant Rio Tinto for $14 billion.
It was the first occasion where a Chinese company gained control of an Australian resource company through a hostile takeover.
Sinosteel said the Midwest takeover is "a major step forward in its international development".
"The company plans to play a significant role in developing the mid-west region of Australia," Sinosteel said in a statement.
Sinosteel was one of the first Chinese companies to do business overseas. Company President Huang Tianwen said the steel company plans to ramp up its overseas activities, including developing mining resources in countries like Australia, India and South Africa.
It already has 21 subsidiaries and two representative offices operating overseas and has established itself in the Southeast Asian, Australian, African, European and South Asian markets.
At present the company’s Channar iron ore manufacturing project is the largest industrial project between China and Australia.
Analysts said that direct ownership of Australian iron ore would help lessen China’s dependence on global mining giants such as BHP Billiton and Rio Tinto.
Steel mills in China, the world’s biggest consumers of iron ore, are seeking to secure alternative supplies amid concerns that BHP Billiton’s proposed takeover of Rio Tinto could create a company with the ability of controling almost half of the Asian iron-ore market.
Iron ore prices have risen almost fourfold since 2001 to a record high. Asian steelmakers have agreed to as much as a 97 percent increase for Australian ore from BHP and Rio Tinto for the year started April 1.
However, Sinosteel’s bid for full ownership still faces opposition from an Australian rival Murchison, which owns 10 percent of Midwest and has refused to sell.
Murchison announced plans earlier to merge with Midwest but dropped them last week.
Sinosteel’s full takeover attempt could be further frustrated by Murchison’s largest shareholder – Harbinger Capital Partners – which holds a 9.11 percent stake in Midwest.
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