Australia Extends Review of Fortescue Stake Sale to Valin

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Fortescue Metals Group Ltd. said Australian regulators extended their review of a stake sale to China’s Hunan Valin Iron and Steel Group, but added that it remains confident of obtaining approval for the deal.



Fortescue, Australia’s third-largest iron ore exporter, said in a statement on March 19 that the Foreign Investment Review Board has given notice that it may take another 30 days beyond the anticipated March 25 to review the acquisition.

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The extension of the review comes after China rejected Coca-Cola’s US$2.4 billion acquisition of Huiyuan Juice Group, raising the prospect that China’s overseas acquisition deals will face further political scrutiny.



Apart from the Fortescue acquisition, China has other pending transactions in Australia, part of a broader move to secure overseas resources.



Aluminum Corp of China is injecting US$19.5 billion into Rio Tinto in exchange for convertible bonds and minority stakes some of the Anglo-Australian miner’s most attractive assets, including the Escondida copper mine in Chile. Rio shareholders will vote on Chinalco’s buy-in in May. Meanwhile, Anshan Iron & Steel, is seeking a 36.3 percent stake in Gindalbie Metals Ltd. in a transaction also being reviewed by the FIRB according to Australian media.



Fortescue plans to sell a 17.6 percent stake, or 260 million shares, for A$644.8 million, to Hunan Valin, in order to fund its expansion.

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"Fortescue remains confident that the structure of the share subscription agreement will enable Valin to obtain FIRB approval," the company said.



A person close to the acquisition told Caijing that he believes the FIRB is generally satisfied with the terms of the transaction, with the board currently consulting with its parent ministry, the Australian Treasury, on a number of minor issues.



“A few insignificant issues need further explanation by Hunan Valin, we still hope to get approval once the issues are clarified,” the person told Caijing.



On March 18, Australian lawmakers launched an inquiry into foreign state-owned companies and sovereign wealth funds investing in domestic companies, part of the backlash from the Chinalco-Rio deal.