Bloomberg citing a lawyer and an analyst said China’s state-owned companies seeking mining and energy acquisitions in Australia are opting for smaller stakes because of opposition to Chinese control of resources.
Mr James Philips a mergers and acquisition lawyer at Minter Ellison said three Chinese buyers submitted proposals to buy up to 40% stakes in Australian resources producers in recent weeks rather than attempting to take control. Australian opposition prompted China Minmetals Group to scale down its offer for OZ Minerals Ltd. in March.
According to a poll of 890 people conducted by Essential Research in April, Chinese companies attempting to buy Australian resources assets include Aluminum Corp of China’s proposed USD 19.5 billion investments in Rio Tinto Group which has yet to be approved by regulators. Some 57% of Australians said Chinese mining investments should be resisted because the nation’s interests would be better served with local ownership.
Mr Peter Arden a resource analyst at Ord Minett Ltd. based in Melbourne said “I think there has been a change of tack recently by some Chinese companies. They are most interested in getting their hands on the resources and making sure that they are at the table.”
According to data from Minter Ellison, deals approved by the Australian authorities when Chinese companies seek minority rather than majority stakes include Hunan Valin Iron & Steel Group’s successful purchase of 16.5% of Fortescue Metals Group Ltd in April.
Mr Philips said “I’m sure initially some advisers said don’t be too aggressive. I assume that as I am seeing transactions now structured in the way I described, it’s in part because companies learned from some of the experience they have had in the Australian and international market. Perhaps a less-assertive approach might be more conducive to long-term success.”
Mr Fu Chengyu Cnooc’s chairman said on April 19th that his company, China’s biggest offshore oil producer, has ruled out overseas takeovers during the global economic slowdown because of rising protectionism. Joint ventures and partnerships overseas are the most productive ways of developing resources abroad, he said.
He said that Chinese companies are attracted to Australia because of its stable political climate and legal framework and won’t be deterred from investing by regulatory restrictions. About 70 Chinese investments totaling some AUD 30 billion have been approved in Australia since 2007.
Mr Philips said overseas buyers need approval from the government to own 15% or more of an Australian company. Stakes acquired by foreign state-owned companies must be agreed by regulators. He said that China needs access to raw materials and from the Australian end it’s welcome because it needs capital to develop projects. My expectation is that investment will continue to flow.”
(Sourced from Bloomberg)
