China’s Antitrust Decision May Affect Overseas Bids

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Mar. 20 – China’s rejection of the Coke-Huiyuan deal may affect ongoing and future bids made by Chinese companies to acquire overseas assets.

The move indicates China’s protectionist stance on huge foreign investment or more interestingly may have been a requital for past failed Chinese bids for the U.S. companies Unocal and 3Com.

This time around, it is China’s turn with Chinalco’s US$19.5 billion bid for Australia’s Rio Tinto and its mining assets. A leading Australian politician, Barnaby Joyce, told WSJ that the Coke-Huiyuan decision is an example of how to treat Chinese companies looking to shop in Australia’s resource sector.

Australia’s Foreign Investment Review Board is delaying decisions on pending Chinese investments, the most notable include the Rio-Chinalco venture and the Hunan Valin’s US$800 million investment of Fortescue Metals.

The agency has also announced that Anshan Iron & Steel asked to resubmit its US$162 million bid to buy a stake in Gindalbie Metals.

The Chinese bid on Rio Tinto is complicated because it promises to provide an infusion of credit that the company urgently needs and will help boost the Australian job market.

Rio Tinto, the second-largest miner in Australia, has been weighed down by debt worth US$38 billion from its purchase of Alcan. China’s  state-owned Export-Import Bank of China has offered the company an unlimited line of credit to allow it to pursue more mining projects in Australia, China and other parts of the world if it takes the Chinalco deal.

If the deal is approved, it would be the biggest overseas investment by a Chinese firm and the largest takeover by a foreign company in Australia.