Shares in Midwest Corporation (MIS) rose today after the company announced that it would not be accepting Murchison Metals' $1 billion-plus scrip takeover offer as its top 20 shareholders had rejected it.
Shareholders representing 45% of Midwest's shares confirmed in writing that Murchison's current offer materially undervalues Midwest relative to Murchison.
These shareholders are all Directors of Midwest.
Midwest said in a statement that for any Midwest shareholders considering the offer, there would be two significant implications.
Firstly, it would be unlikely for synergy benefits to be achieved and secondly that there would be no capital gains rollover relief for those who accepted the offer.
"Given the very strong performance in the Midwest share price, shareholders who accept the offer could get a very large tax bill.
"With an increase in Midwest's share price of 861% since April 2006, significant value has been created for our shareholders and we appreciate our shareholders continued strong support for the Midwest Board and management."
If Midwest was to accept the offer from Murchison, Midwest would hold only 31 percent of the combined group on a pro forma basis, despite contributing 85 percent of total resources.
Midwest and Murchison are both developing iron ore projects in the mid-west region of Western Australia and are in competition to develop a new deep water port at Oakajee near Geraldton and a railway to move the iron ore from mines to market.
By acquiring Midwest, Murchison would have removed its main rival for the $3 billion development.
The board of Midwest reiterated its insistence that shareholders take no action on the offer from Murchison.
"We are very confident in our ability to develop Midwest into a standalone iron-ore producer of scale and will only support an offer if the terms fully reflect the fair value and potential of our attractive asset base."
Midwest rose by 6 cents to close the day at $4.97.
