THE WALL STREET JOURNAL: Bid for WMC May Be Canberra's Next Headache: “Like the takeover battle in 2001 between Shell and Woodside Petroleum Ltd., the latest bid contains myriad potential pitfalls for Mr. Costello and the government. Woodside operates the multibillion-dollar North West Shelf gas project, and Shell is both a partner in the project and Woodside's single biggest shareholder.” (ShellNews.net) 17 Dec 04
Opposition to Xstrata Offer
By Australian Lawmakers
Could Spur a State Ruling
By IAN PEMBERTON and RAY BRINDAL
DOW JONES NEWSWIRES
December 17, 2004
CANBERRA, Australia -- Xstrata PLC is feeling the heat of Australian politicians who oppose the Swiss miner's hostile 7.4 billion Australian dollar (US$5.6 billion) takeover bid for WMC Resources Ltd., a nickel and copper miner that also owns nearly 40% of the world's uranium resources.
Ultimately, the issue is almost certain to land on the desk of Treasurer Peter Costello, the man who surprised investors three years ago by blocking Royal Dutch/Shell Group's A$10 billion bid for the operator of a huge natural-gas project on national-interest grounds.
Mr. Costello has stayed above the fray so far, but his ruling would again thrust the nation's foreign-investment guidelines into the glare of global currency and equity markets.
Neither company wants Canberra to take an active role in the fate of the deal. WMC's preferred strategy is to remain independent, but Chief Executive Andrew Michelmore said Thursday that Xstrata, which has reserved the right to increase its A$6.35-a-share offer, should show its hand now.
"Our advice to shareholders continues to be Xstrata's offer is not good enough," Mr. Michelmore said in a statement e-mailed to Dow Jones Newswires.
As part of its defense strategy, WMC is chaperoning potential partners from China and elsewhere around its Olympic Dam copper and uranium mine.
"The last thing we want to do is wind up the politicians and say it has got to be a national-interest issue, and find [that] another buyer we like gets caught as well," said one person close to the company.
But in case the political debate heats up, Xstrata already is telling its story to those who matter in Canberra.
With a local record that includes more than A$8.5 billion of investment since 2002, Xstrata is sensitive to repeated, though unsubstantiated, reports that the Swiss trading house Glencore, its 40% owner, still has links with former fugitive financier Marc Rich.
Xstrata confirmed that Chief Executive Mick Davis met Australian Prime Minister John Howard last month, while local executives have met members of the state government of Western Australia, where WMC's nickel operations are based.
Mr. Davis plans to meet Mr. Costello soon, after Xstrata lodges a formal bid application with the government's Foreign Investment Review Board, another person close to the transaction said Thursday.
This meeting will likely be held before the bid closes Jan. 28, although Xstrata has the option of extending its offer for some months. Mr. Costello's office declined to comment.
The treasurer has ignored criticisms by junior lawmakers in the Senate and the Western Australian state parliament that Xstrata's closure of the unprofitable Windimurra vanadium mine places a question mark over whether the company is a good corporate citizen.
Whether Xstrata should be allowed to sell uranium is also an issue for some lawmakers and media commentators, notwithstanding Canberra's strict controls on uranium exports, including a commitment that the product not be used for any military purposes.
China isn't an approved buyer of Australian uranium at the moment, although bilateral talks have begun at the behest of WMC.
Like the takeover battle in 2001 between Shell and Woodside Petroleum Ltd., the latest bid contains myriad potential pitfalls for Mr. Costello and the government. Woodside operates the multibillion-dollar North West Shelf gas project, and Shell is both a partner in the project and Woodside's single biggest shareholder.
On advice from the government's investment-review panel, Mr. Costello said he was concerned Shell might warehouse exports from the Shelf and instead favor sales from other overseas gas projects.
Mr. Costello's rejection put immediate, but short-lived, pressure on the Australian dollar, as the country's open-door investment policy was called into question. It also sparked a furious debate about the role played by local politics in the decision.
HSBC Australia chief economist John Edwards said the reaction of financial markets if the takeover is knocked back by the government is likely to be harsh. The factors Mr. Costello would need to consider regarding the Xstrata deal are much different from those surrounding the Woodside bid, Mr. Edwards said.
"It wasn't just a matter of losing Woodside...but of losing Australian control over the marketing and production sequence of this project," he said. "It was very definitely specific to Woodside."
--Malcolm Scott in Sydney and Stephen Bell in Perth contributed to this article.
Write to Ian Pemberton at firstname.lastname@example.org
and Ray Brindal at email@example.com