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Australia's Murchison Offers $889 Million for Midwest

Australian iron ore miner Murchison Metals made a A$987 million (US$889 million) bid for Midwest Corp on Wednesday, seeking to combine the two miners' iron ore projects in the nation's west.

Murchison, which has partnered with Japan's Mitsubishi Corp to develop iron ore projects, said it made the offer for its smaller counterpart after merger talks broke down.

Murchison is offering one of its shares for every 1.08 Midwest share, valuing Midwest at A$4.70 per share, or A$987 million based on shares on issue.

The offer was conditional on Midwest not incurring a material tax liability if Midwest sells a 50%stake in two projects to China state-owned steel trader Sinosteel Corp.

Murchison also made a lower offer worth A$4.38 per share, or A$919 million based on Reuters calculations, if Midwest cannot meet the conditions for the higher bid.

Midwest shares last traded on Tuesday at A$3.51, while Murchison ended on Tuesday at A$5.08.

Murchison, which said in June it would spend more than A$3 billion with Mitsubishi to develop iron ore in Western Australia state, said it hoped to unlock cost savings from the takeover.

Murchison wants to jointly develop the two companies' iron ore projects which it also expected would provide opportunities to develop new port and rail infrastructure in the region.

Gresham Partners is advising Murchison on the deal.