The battle for control of WA iron ore hopeful, Midwest Corporation, will reach a climax early next month after the company yesterday called a meeting to vote on an issue of options to executive directors and management.
The announcement came two hours after Midwest’s now spurned suitor, Sinosteel of China, had revealed that it had lifted its stake from 19.89% to 28.37% under its $6.38 a share offer.
Midwest still has a recommendation out on that offer but has thrown its lot in with rival Murchison Metals which has proposed a backdoor takeover of it by Midwest in an all paper offer that valued Midwest at more than $7 a share.
Midwest shares traded 6c down at $6.73 at the close yesterday, and Murchison was down 5c at $4.05 at one stage before ending up a cent at $4.11.
Sinosteel last week declared its offer unconditional and now seems to be pushing towards getting just over 50.1%, or as close as possible so as to be in a position to block the Midwest shareholders approving the issue at next month’s EGM.
Midwest directors said that all shareholders who had accepted or were going to accept the Sinosteel offer before the meeting, would retain their voting rights for the meeting. So Sinosteel can’t vote the shares unless the rights are ceded to Sinosteel, which some could very well be.
Midwest though will have to reckon on very few of the shareholders voting for the issue: if they have accepted the lower cash offer from Sinosteel, why would they take the trouble to vote in favour of the option issue?
Sinosteel’s race up the Midwest share register is a way of sending a message to Murchison that it will not get control and the reverse takeover has no chance of succeeding: it’s doubtful now, that it could, given that Sinosteel has more than 28% of MIS’s capital.
With Murchison shareholders to vote on the reverse takeover via a simple majority vote, it looks as though the deal will be off because if Sinosteel gets a few more per cent, it could call a meeting of Midwest shareholders and vote out the board, if it wanted to throw its weight around.
Being a Chinese government associated company would make it a bit reluctant to do that, so a simple demonstration of voting down the option issue would be the simplest way to do it.
In its statement yesterday Midwest said that Sinosteel had signalled its intention to vote against it.
That Sinosteel has managed to increase its holding even though Midwest’s shares are above Sinosteel’s offer price, trading at $6.71, and higher in the past week tells a lot about where some of the shares accepting the lower priced offer have come from.
Some 16.176 million were accepted in one line at $6.38. That has to be a foreign holder without Australian capital gains tax needs. There were several other interesting parcels, one of 409,000 shares, or around $2.5 million in value.
A company called Vital Rays Investments Ltd is given as owning 16.171 million shares, or 7.59%.
The stock has retreated from a high of $7.10 on May 30 and Sinosteel has said it is confident that its cash bid will eventually trump Murchison’s all-stock merger plan.
Murchison’s shares at $4.05, implies its merger proposal is now worth around $7.07 per Midwest share.
It is backed by Japan’s Mitsubishi and US hedge fund Harbinger Capital, Murchison’s top shareholder, which has built up a stake of 8.1% in Midwest.
Sinosteel’s $6.38-a-share offer was originally conditional on getting at least 50% acceptance but last week it scrapped the condition, improving the bid’s attractiveness. It has said it will not raise its bid above $6.38.
Here’s the statement to the ASX from the Midwest board about the meeting to consider the option issue:
The Directors of Midwest Corporation Limited (ASX: MIS) confirm that Midwest intends to convene a general meeting in mid July for shareholders to vote on:
- The implementation of a share option plan under which Midwest executive directors and Midwest’s senior management team would be granted a total of 15,000,000 options over Midwest shares; and
- The establishment of a new option scheme and the issue of up to 1,500,000 employee options under that scheme.
A notice convening the Meeting will be dispatched to Midwest shareholders shortly once the relevant regulatory approvals have been obtained.
The Midwest Directors note that Sinosteel Ocean Capital Pty Ltd has released its Sixth Supplementary Bidder’s Statement dated 2 June 2008 which confirms the establishment of a voting facility. The voting facility will ensure that Midwest shareholders who have already accepted Sinosteel’s Offer or accept before the voting record date of the Meeting will be eligible to vote on the grant of the
Options.
Sinosteel has confirmed that as its Offer is now unconditional, it will not proceed to transfer or register any Midwest shares registered in the name of accepting shareholders into its own name until after the voting record date for the Meeting.
This ensures that Midwest shareholders who have already accepted Sinosteel’s Offer or accept before the voting record date of the Meeting retain their voting rights in respect of the Options even if Sinosteel’s Offer closes before the voting record date for the Meeting. Sinosteel has confirmed that the voting facility will not affect the timing of payments to accepting shareholders.
The Midwest Directors remind shareholders that:
- Directors
