Negotiations follow demand for higher price
Sinosteel's US$1.2 billion offer for Australian Midwest has been blocked by a major shareholder of Midwest seeking a higher price, leaving Sinosteel, which has picked up an about 4 per cent stake in Midwest in the open market, to look for ways around the problem, market sources said.
Midwest shareholder David Law has been holding out for a higher price even as Midwest's Friday closing price of A$4.66 (HK$31.99) puts Sinosteel's A$5.60-a-share offer at a 20 per cent premium.
Midwest and Sinosteel declined to comment. Mr Law could not be reached for comment. A source close to Mr Law said that he wanted a deal to happen. 'They are negotiating with him and discussions are going on. We believe in the Midwest story and see more upside there,' the source said.
Mr Law was originally believed to control anywhere from 40 to 55 per cent of Midwest through holding companies and allied shareholders.
Some sources, however, put his stake at as little as 14 per cent and say Sinosteel is looking at those board members and shareholders who like the deal as it is now to see if they have enough support to go forward. 'They're trying to work things out and they might put something forward that's short of full or total control,' one source said.
Effectively, Sinosteel and Midwest are negotiating the ground rules, such as putting in an exclusivity agreement that will allow the real negotiations to start. 'Things are moving slowly,' another source said.
