Hong Kong company sues BlueScope over failed attempt to buy NZ business

MELBOURNE - A Hong Kong listed company controlled by billionaire Li Ka-Shing is seeking damages from BlueScope Steel Ltd over a failed attempt to buy a New Zealand iron sands business.

Cheung Kong Infrastructure Holdings Ltd (CKI) has started proceedings in the Federal Court against BlueScope Steel seeking damages for alleged "misleading and deceptive conduct" in relation to the sale of Taharoa Iron Sands in late 2008.

BlueScope Steel rejects the accusation.

"BlueScope Steel strongly denies the allegations and will be rigorously defending itself against the claims," spokesman Michael Reay said in an email yesterday.

The company said legal proceedings against CKI were currently the subject of a confidential arbitration in New Zealand.

The $250 million sale of Taharoa Iron Sands - a wholly-owned indirect subsidiary of BlueScope Steel - to Cheung Kong was announced on August 26, 2008.

But the transaction fell through on December 17, 2008, after Cheung Kong failed to get the green light from local authorities to acquire the business on New Zealand's North Island.

The deal needed New Zealand Overseas Investment Office approval.

"During the bidding process for the mine and iron sands business, Bluescope provided false information, and failed to disclose information, which was crucial to the ongoing operations and value of the mine," the Cheung Kong statement said.

"The false and undisclosed information included customer, landowner and shipping matters.

"The statement of claim alleges that such conduct by Bluescope caused CKI to overvalue the mine."

Cheung Kong is a publicly listed infrastructure company with a market capitalisation of about $HK67 billion ($12.3 billion) at December 31, 2009, according to the company's website.

It operates in Hong Kong, China, Australia, New Zealand, the UK, Canada and the Philippines.

Iron sands are an iron ore substitute used by steel-makers in the smelting process.

In 2008, the Taharoa mine was estimated to export about 850,000 tonnes of iron sands, mainly to Japan and China, annually.

Last month, Cheung Kong lodged a related claim against Merrill Lynch International (Australia) Ltd, alleging "misleading and deceptive conduct" while acting as an adviser to BlueScope.

"During the due diligence process for the sale of the mine Merrill Lynch's conduct created a false impression about the ongoing business and value of the mine," Cheung Kong said in a statement dated March 25.

Cheung Kong was also seeking damages against Merrill Lynch.

Merrill Lynch was financial adviser to BlueScope Steel on the sale.

- AAP