The battle for control of Midwest Corporation, the small western Australian iron ore seems to be over after two major hold out shareholders capitulated and accepted the offer from China-backed Sinosteel.
The two acceptances gives Sinosteel 82% of Midwest.
Sinosteel said yesterday that its one time bidding rival, Murchison Metals Ltd and a group called Armadale Offshore Inc had accepted its offer, taking acceptances to "in excess of 82 per cent" of Midwest’s issued shares.
Armadale Offshore is a company associated with mystery Malaysian investor, Tien Seng, also known as David Low.
He led a group of investors who at one stage were thought to control 30% or so of Midwest.
Murchison held 9% of Midwest’s shares and Armadale 12%.
Their decisions leaves US hedge fund Harbinger Capital, as the hold out with 15.2% of Midwest. According to media reports this morning, Harbinger accepted the offer by the 7 pm deadline last night.
It had indicated previously that it will reject the Sinosteel offer of $6.38 cash per share, having paid more than that to build its stake.
Harbinger is a major shareholder in Fortescue Metals and in the Cliffs iron ore group of the US, which is bidding to mop up the outstanding shares in Portman Mining it doesn’t own.
Sinosteel’s offer was scheduled to close at 7 pm yesterday, Sydney time.
Sinosteel made it clear in yesterday’s stockmarket filing that the offer would not be extended past and would definitely close.
It also said that the offer would not be increased from the $6.38 cash price.
Sinosteel said Monday that if Harbinger accepted the offer, it "may proceed to compulsory acquisition" of the remaining Midwest shares.
If Harbinger does not accept, then "Sinosteel will ask the directors of Midwest to review whether Midwest should remain listed on the (Australian securities exchange) or be removed from the official list of the ASX …
"If Midwest remains listed on ASX, liquidity in Midwest shares is likely to be very low with is two largest shareholders holding in excess of 97% of Midwest shares," Sinosteel said.
Murchison said in a statement yesterday that "it has raised approximately $135 million in cash through the disposal of its holding in Midwest Corporation Limited”.
"Murchison held 21.2 million shares representing a 9.2% stake in Midwest and has accepted the takeover offer for Midwest from Sinosteel.
"Proceeds from the sale will be used primarily to help develop the Company’s existing projects."
Murchison also revealed that mediation over a legal action from Chameleon Mining NL had been unsuccessful, and Chameleon revealed that it had filed full security of costs for its legal action over rights to 5% direct interest in the Jack Hills and Weld Range leases held by Murchison.
Chameleon said its legal action was now due to be heard in court before Easter 2009. It claimed the value of the claim was between $150 million to $250 million.
Perhaps it was for that statement that Murchison shares fell 14% or 28 cents to $1.67 yesterday, which is a new 52 week low for the stock.
To complicate matters Harbinger has a big stake in Murchison, while Sinosteel has a smaller stake.
Midwest shares ended at $6.36, down 1 cent, ahead of the Sinosteel bid closing.
Sinosteel has reportedly lodged an application with the Foreign Investment Review Board seeking approval to purchase Murchison, which has nearby iron ore projects.
Murchison and its joint venture partner Mitsubishi were recently named the WA Government’s preferred tenderer to build the port infrastructure at Oakajee to service the expected boom in iron ore production in the state’s Mid West region.
That increases Murchison’s attractiveness to Sinosteel.
