Murchison trumps Sinosteel's A$1.36 billion bid for Australia's Midwest Corp

27 May 2008

CHINA'S plans to acquire iron ore assets in mid-west Australia received a setback after local firm Murchison Metals unveiled an A$1.5 billion merger proposal for Midwest Corporation, trumping Sinosteel's A$6.38 a share bid, which valued the company at A$1.36 billion.

Under the Murchison merger proposal, Midwest will remain the listed entity. The merger terms will be 0.575 Midwest shares for each Murchison share, implying a value of $7.17 for a Midwest share.

Murchison Metals has a market capitalisation of A$1.65 billion and a merger would create an A$3 billion entity with operations across western Australia.

The merged company would be able to develop the Jack Hills and Weld Range iron ore deposits which have a combined annual production capacity of 40 million tonnes.

Midwest Corporation said its board has recommended an all-share offer from Murchison Metals Ltd, which values Midwest at about  A$1.5 billion (US$1.4 billion) or $7.17 a share. The recommendation for the Sinosteel offer still stands while it assesses the latest proposal, Midwest said in a statement.

The new proposal for a reverse takeover by Murchison of its 19.9 per cent owned Midwest comes as Sinosteel was almost sure of clinching the deal that includes rights to build an A$3 billion port and rail infrastructure for western Australia's emerging iron ore supplier.