13 January 2015

Case study: AQ turns a red light to green for CMOC

The brief

To advise Hong Kong and Shanghai listed China Molybdenum (CMOC) on a successful acquisition of Rio Tinto’s 80% interest in the Northparkes copper mine for US$820m, by competitive process (2013).

Big picture

We had recently come off another deal with the team from CMOC, and having withdrawn their offer on the other deal, we knew they were looking for a copper mine of this size. So, we introduced CMOC to Macquarie who was running the auction for Rio Tinto and asked if we knew of any suitably qualified Chinese buyers to introduce to the process.

AQ in action

  • CMOC delivered an NDRC “road pass” up front. This is the PRC regulator’s green light to proceed with the deal, significantly de-risking the Chinese bid.
  • As a Hong Kong listed company, the deal required shareholder approval, which introduced uncertainty for the seller’s certain outcome. We developed a structure that gave Rio Tinto advance certainty the shareholder approval would be forthcoming.
  • Our Beijing Banking & Finance team addressed Rio Tinto's concerns around funding certainty.
  • We secured MOFCOM anti-monopoly law approval in record time.
  • The Foreign Investment Review Board (FIRB) treated CMOC as a foreign government investor because it has Chinese government shareholding.  We knew this meant FIRB approval would take longer than with other bidders. So we lined up our application early to create a level playing field against other competing bidders.
  • We knew that historically, some Chinese bidders underestimated the weight placed on Health & Safety issues by vendors. So the deputy Chairman of CMOC came to Australia to present to Rio Tinto on CMOC’s track record in this area. This confirmed that CMOC was a serious bidder and aligned to western principles of doing business.

Value delivered

It was one of the most competitive sales process run in Australia in recent times – and nobody thought a Chinese bidder had a real chance of winning. We changed that perception.

We worked hard to position CMOC as a “no fuss” bidder. We anticipated what Rio Tinto’s early reservations would be and were ready to address them before they were even raised. We built trust by meeting and/or exceeding all deadlines for the deal – this created confidence in CMOC’s ability to execute without fuss. 

King & Wood Mallesons, as a PRC/HK/English and Australian law firm, was uniquely placed to step in between the client and Rio and give opinions and letters of comfort on matters of concern to Rio – exploding myths and dispelling fears. King & Wood Mallesons' advice helped get Rio comfortable because it knew what a rigorous process we would go through to issue opinions. 

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We explore the key issues being considered by clients looking to unlock investment opportunities in the People’s Republic of China.

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