Hong Kong utility Cheung Kong Infrastructure (CKI) Holdings has launched legal proceedings against investment banker Merrill Lynch, accusing it of misleading conduct over the failed sale of a New Zealand mining company 18 months ago.CKI dropped a $NZ258
Hong Kong utility Cheung Kong Infrastructure (CKI) Holdings has launched legal proceedings against investment banker Merrill Lynch, accusing it of misleading conduct over the failed sale of a New Zealand mining company 18 months ago.
CKI dropped a $NZ258 million bid 15 months ago to buy iron sands miner New Zealand Steel Mining (NZSM) from BlueScope Steel after the deal was blocked by New Zealand's Overseas Investment Office, the Australian newspaper reported.
At the time, Finance Minister Bill English said the application had been turned down because cabinet ministers did not believe CKI met the overseas investment office criteria for substantial and identifiable benefit.
He said atthe time that a key factor in its failure to met the criteria was the global downturn.
But the Hong Kong utility said yesterday it had lodged a statement of claim with the Federal Court of Australia alleging Merrill Lynch had engaged in "misleading and deceptive conduct" in 2008 in its role as an adviser to BlueScope on the sale.
"During the bidding process for the sale of the mine, it is claimed that Merrill Lynch provided false information about the mine and failed to disclose information which was crucial to the ongoing business value of the mine," CKI said.
CKI also alleged that during the due diligence process Merrill Lynch created a false impression about the ongoing business and the value of the mine and that this induced CKI to overvalue the mine.
CKI is now seeking damages for costs associated with the sales process.
Merrill Lynch and BlueScope declined to comment.
The deal was scuppered in December 2008, four months after Cheung Kong, controlled by tycoon Li Ka-Shing, had announced the deal to buy BlueScope's iron sands operation, south of Raglan. NZSM's business assets include the sands mining and export operation, Taharoa Iron Sands.
In a summary of its decision, the Overseas Investment Office said at the time: "given the reduced demand for the product produced by the mine and the deteriorating global economic conditions, CKI has come to the decision that plans to expand the business are no longer viable".
Taharoa Iron Sands mines and exports iron sand to steel producers in China and Japan. It was acquired by BlueScope Steel as part of the acquisition of NZ Steel from the Government in 1992.
BlueScope is Australia's biggest steel maker.
In April 2008, Cheung Kong Infrastructure bought Vector's Wellington power network for $785 million.
Cheung Kong has interests in 56 countries, about 260,000 employees and assets including property, hotels, telecommunications and ports.
