Chinese steel making giant Sinosteel has indicated it may not support the proposed merger between takeover target Midwest Corporation Ltd and Murchison Metals Ltd as questions are raised over the latter's asset quality.
The Chinese company, which holds a 40 per cent interest in Midwest, said there remained questions about the quality of Murchison's resource base and the synergies expected to be obtained from the merger.
Sinosteel said the synergies were likely to favour Murchison substantially more than Midwest. The Chinese steel maker holds a 2.4 per cent interest in Murchison.
Sinosteel said there were also concerns over Murchison's current litigation with Chameleon Mining NL and the arrangements Murchison has made with Mitsubishi Corporation in relation to its assets.
The queries come in the wake of Midwest's announcement last week that it would seek discussions with its largest shareholder over the proposed merger, a move welcomed by the steel maker.
Additionally Sinosteel pointed out that for the proposed merger to go ahead, it would need Foreign Investment Review Board approval, due to its controlling stake in the company.
"This approval has not been obtained," Sinosteel said today.
Sinosteel is offering $6.38 cash for each Midwest share. The Chinese company needs to reach over 50 per cent to dash the chances of the merger.
Midwest has previously stated that it endorses both the merger and Sinosteel's takeover bid.
