Chinese Regulators May Seek Changes to Australian Contracts

Shell’s acquisition of BG is prompting an extensive review by Chinese anti-trust regulators that could lead to changes in contracts with Chinese state-owned buyers. The review by China’s Ministry of Commerce (Mofcom) is expected to take up to 12 months and could lead to some Australian supply contracts being renegotiated as the government is expected to seek concessions in exchange for approving the transaction. While it is too early to know for certain what kinds of changes the government will seek in exchange for approving the deal, an earlier review of Glencore’s 2013 takeover of Xstrata may provide some insight. In its review of the $30 billion takeover of Xstrata, Mofcom focused on copper concentrate where both companies had overlapping activities, according to an analysis by law firm Clifford Chance. Mofcom sought changes to existing contracts despite reaching the conclusion that the combined entity would not have a significant share of China’s copper concentrate market. These conditions included the divesture of Glencore’s copper project in Peru and a guaranteed supply of copper concentrate over eight years under an annual contract that was a departure from usual business practices for the sector. Please fill out form below to view article.