Sichuan Hanlong Group, a Chinese investor in highway and power projects, cut its takeover bid for the rest of Australia’s Sundance Resources Ltd. (SDL) by 21 percent, said a person with knowledge of the matter.
Hanlong, which won conditional approval for the bid this month, offered 45 Australian cents a share, said the person, asking not to be identified as the information is private. The new offer from Hanlong, which owns about 17 percent of Sundance and had bid 57 cents a share in October, values the iron ore developer at A$1.4 billion ($1.5 billion).
The truncated bid comes in the wake of a 34 percent decline in iron ore prices since Hanlong’s first offer on Oct. 4 and is still more than a third above Sundance’s closing price today. Slowing demand in Europe and China, the biggest metals consumer, is weighing on commodity prices, prompting companies to assess spending plans on new mines and takeovers.
“Somewhere in the forties will probably be acceptable,” Hayden Bairstow, resources analyst at CLSA Asia-Pacific Markets, said by phone. “It’s an unfunded development play, without the bid, they can’t afford to do it.”
Buying Sundance will give Hanlong, which aims to invest as much as A$5 billion in resource assets, control of the $4.7 billion Mbalam rail, port and mine project straddling the border of Cameroon and Republic of Congo.
Sundance, which fell 26 percent since Oct. 4, dropped 2.9 percent to 33.5 Australian cents at the close today in Sydney.
The drop in iron ore prices has been a key driver in Hanlong lowering its bid, Bairstow said. The company was considering reducing its offer to about 50 cents earlier this month, people with knowledge of the matter said Aug. 2.
“Negotiations with Hanlong are incomplete,” Sundance said in an e-mailed response to questions about the 45-cent-a-share bid. “While discussions are ongoing, Sundance isn’t commenting.”
Wu Shijun, a Chengdu-based media official at Hanlong Group, couldn’t be reached for comment. Dow Jones reported the lower offer price earlier today.
Sundance and Hanlong are in talks about a “reasonable acquisition price,” Perth-based Sundance said in an Aug. 2 statement. The approval from China’s National Development and Reform Commission is conditional on the price, Hanlong securing debt funding and mining development rights, Sundance said.
BHP Billiton Ltd. (BHP), the world’s biggest mining company, this month said it is reviewing its development pipeline of major projects as prices fall. Hanlong made an initial offer in July last year, increasing its bid by 14 percent in October after Sundance rejected the first bid as too low.
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