Management across Cultures

Sinosteel, as a state-owned enterprise (SOE), is China's second-largest iron-ore importer. To date, Sinosteel has 86 controlled subsidiaries, among which 63 are in China and 23 foreign entities are located in Australia, South Africa, India, Singapore, Brazil, Germany, Gabon, Cambodia, Indonesia, Vietnam, Turkey, Hong Kong, and Macao. The company is mainly engaged in mining and processing of minerals, related trading and logistics, construction, engineering and technical services, and equipment manufacture.

Starting with the Channar joint venture in 1987, in which Rio Tinto has a 60 per cent share, with Sinosteel holding 40 per cent, Sinosteel has over 25 years’ history in investing in and running a business in Australia. Although the original Channar joint venture was one of the largest Chinese investments in the world and it was the first overseas mineral resource project entered into by a Chinese multinational enterprise (MNE), Sinosteel is best known for its internationalisation up to 2008 by winning a tough battle for control of an Australian iron-ore miner, Midwest Corporation. In December 2007, Sinosteel announced a $1.05 billion (or $.4.91 per share) bid for Midwest, which followed Australian iron-ore company Murchison Metal's bid of $710.2 million or $3.35 per share. Sinosteel was motivated to compete with Murchison because Sinosteel was already a shareholder of Midwest and was willing to further increase its controlling power over the company. With full ownership of Midwest, Sinosteel could secure an offtake agreement for Midwest ore production, rather than always finding itself in a negotiation process with Midwest. In early February 2008, Murchison abandoned its offer because of low acceptance. Despite Murchison's withdrawal, Midwest announced on 20 February 2008 that Sinosteel's offer was unsatisfactory because it undervalued the company and its prospects. In mid-March Sinosteel launched a hostile takeover bid, and offered $905 million for the 80.1 per cent of Midwest that it had not yet acquired, for a total valuation of the company at $1.13 billion or $5.28 per share. In the following months, Sinosteel continued to buy up shares in Midwest until on 11 July it announced that it had acquired a controlling 50.97 per cent stake. Finally, after American hedge fund Harbinger Capital gave up its 15.2 per cent stake, on 25 September Sinosteel announced that it held a 98.52 per cent stake.