RAW AMBITION: Sinosteel, one of China's largest steelmakers, is increasing its investments in resource-rich countries (By WEI YAO)

Sinosteel Corp., one of China's largest steelmakers, has finally clinched its AU$1.36 billion ($1.31 billion) takeover of Midwest Corp., a Perth (Australia)-based iron ore miner, after a seven-month game of seesaw.

On June 8, four other Midwest stakeholders accepted Sinosteel's cash offer of AU$6.38 ($6.2) per share. Besides additional shares it snapped up from the market, Sinosteel now controls 50.97 percent of the company, surpassing the 50.1-percent threshold needed for a hostile takeover.

This was the first successful hostile takeover bid by a Chinese company. In 2005, the state-owned China National Offshore Oil Corp. Ltd. attempted a hostile $18.5 billion takeover of its American rival Unocal Corp., but opposition from U.S. lawmakers thwarted the deal.

Sinosteel is currently China's largest iron ore importer and a major supplier for many Chinese steelmakers. Its target, Midwest, is rich in small mines and has a proven iron ore reserve of around 500 million tons. Its proximity to Perth's port further burnished its appeal to Sinosteel, which had forged joint-venture mining projects with Midwest in Australia as early as 2005.

Midwest stakeholders did not hesitate to sell their shares to the Chinese company immediately after the rival bidder Murchison Metals Ltd., another Australian iron ore explorer, bowed out of its merger plan with Midwest. Observers said Murchison dropped out of the bidding race when Sinosteel accumulated more than a 45-percent holding in the Perth company.

On May 26, Murchison proposed a merger with Midwest via a share swap that initially represented a 10-percent premium over Sinosteel's cash offer. But when the shares of both the Australian miners subsequently faltered, the Chinese gained the upper hand. Observers say Midwest's stakeholders favored Sinosteel over Murchison in part because of the certainties underlying the all-cash offer.

Behind the bid

The Midwest victory is of great significance for Sinosteel, Huang Tianwen, the company's president, said in a public statement.

"The deal will also fuel our efforts to develop Midwest's region in west Australia into a major world-class iron ore production base," he said.

Besides this, direct ownership of Australian iron ore also could relieve China's reliance on BHP Billiton and Rio Tinto Group, both of Melbourne, Australia, to feed its domestic steel industry's huge need for raw materials. In 2007, China imported more than 40 percent of its iron ore from Australia, which accounted for 53 percent of Australia's total exports.