Hanlong Misses Deadline for $1.19 Billion Sundance Iron Bid
The missing billionaire chairman of Sichuan Hanlong Group, reportedly in police custody, faces the collapse of his company’s $1.19 billion takeover of Australia’s Sundance Resources Ltd. (SDL) as a term-sheet deadline looms.
Closely held Hanlong won’t deliver a term sheet to acquire Sundance by 5 p.m. in Perth today and the deal can be ended if further talks don’t lead to an agreement by April 3, Sundance said in a statement. The target said March 21 it hasn’t been able to reach Liu Han and the official Xinhua News Agency reported March 22 that a man with the same name is under investigation for sheltering a murder suspect.
Liu Han’s disappearance has compounded Hanlong’s struggles to secure funding and government approval for its acquisition of the iron ore miner. Hanlong reduced its original October 2011 bid last year after iron ore prices plunged. The deadline for the term sheet was extended when China Development Bank Corp. failed to agree on a loan.
“It’s been a very long process that has failed,” said Evan Lucas, market strategist at IG Markets Ltd. in Melbourne. “The underlying commodity is moving in the wrong direction.”
Sundance’s shares were suspended March 19 after trading in Sydney at 21 Australian cents, below Hanlong’s offer of 45 cents a share, signaling investors don’t expect the deal to succeed. Hanlong, which holds about 14 percent of Perth-based Sundance, in August cut its bid for Sundance by 21 percent to 45 cents. The shares have fallen more than 46 percent since Nov. 30.
“In light of this advice from Hanlong, Sundance and Hanlong are required to enter into a five business day good faith consultation period,” Sundance said in the statement. “If the parties fail to reach an agreement during that period, either party may then terminate,” the deal, it said.
A March 22 Xinhua report posted to the website of China’s Ministry of Public Security said the murder suspect who had been given shelter was Liu Yong, from the city of Guanghan in Sichuan province. The article said his brother, Liu Han, was being investigated for harboring him, without identifying Liu Han as Hanlong’s chairman.
Hanlong Chairman Liu Han’s residence is also in Guanghan, according to a 2003 statement by Sichuan Jinlu Group, which is part-owned by Hanlong. In a March 20 statement, Jinlu said it wasn’t able to get in touch with him.
Xinhua reported in 2009 that a man named Liu Yong incited gunmen to kill three people at an outdoor teahouse in the Sichuan city of Deyang.
Liu Han’s past also includes escaping an attack by hired gunmen. Xinhua reported in 2006 that a businessman from Sichuan province named Liu Han was the target of a 1997 assassination attempt by another businessman who blamed him for the loss of more than 90 million yuan. A hit man hired by Yuan Baojing tried to kill Liu Han and failed, according to Xinhua. Yuan was executed in 2006 for killing another man who threatened to expose the murder plot, Xinhua reported, without identifying Liu Han as Hanlong’s chairman.
Attempts by Sundance to contact Liu Han have failed since at least March 21, as have efforts by another Chinese firm, Sichuan Jinlu Group, that he leads. Sundance Chairman George Jones couldn’t be reached for comment when contacted on his mobile phone late yesterday. Paul Armstrong, of Read Corporate, an outside spokesman for Sundance, declined to comment.
A probe of Liu Han could lead to the highest-profile case against a Chinese businessman since Xi Jinping and Li Keqiang took control of the Communist Party in November as part of a once-a-decade leadership transition. Xi and Li were named president and premier this month, both promising to get tough on corruption.
Liu Han was ranked the 230th richest person in China with wealth of 6.3 billion yuan ($1 billion), according a list of the 1,000 richest people in China published September 2012 by the Shanghai-based Hurun Report. That was up 26 percent from 2011, Hurun said. Liu Han was a member of the Sichuan province’s political consultative conference, a government advisory body, according to a notice in 2009.
“It is possible they will make an example out of it to convince the public that even multimillionaires are not immune to the new spirit of fighting corruption,” said Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong. “It may be one of these politically well-timed cases to illustrate the party’s determination.”
Liu Han and his ex-wife were in Beijing during the National Party Congress this month and were detained after it ended, according to a report in Shanghai Securities News, which cited unidentified people familiar with the matter.
Sichuan Hanlong media official Wu Shijun declined to comment when reached by telephone yesterday. Two calls to the office of the board secretary of Sichuan Jinlu Group rang unanswered yesterday, as did a call to the Ministry of Public Security in Beijing.
In the absence of an agreed extension, failure to deliver the term sheets today will trigger the five-business day good- faith consultation period, followed by a 10-day termination period in which both parties may end the deal, Sundance said March 20. The two companies had met and they remained in incomplete and confidential talks, Sundance said March 22.
“The banks I don’t think would find themselves in a position to do any lending,” Peter Rudd, resources and mining manager at Altitude Private Wealth in Melbourne, said by phone. The deal going ahead “seems remote with the recent circumstances that have developed,” he said.
Iron Ore Prices
Iron ore prices may decline to an average of $110 a metric ton in 2014, according to analyst estimates compiled by Bloomberg. They have averaged at $148.90 a ton this year. Mining companies deferred expansions and delayed projects on expectations that prices have passed their highs, after economic growth began slowing in China, the biggest buyer of metals.
Liu Han’s disappearance may scuttle a second deal as well: General Moly Inc. (GMO), the Lakewood, Colorado-based owner of two molybdenum mining projects in Nevada, suspended work on a $665 million loan that was to be arranged by Sichuan Hanlong after the report that Liu Han had been detained.
To contact Bloomberg News staff for this story: Elisabeth Behrmann in Sydney at firstname.lastname@example.org; Soraya Permatasari in Melbourne at email@example.com; Henry Sanderson in Beijing at firstname.lastname@example.org; Helen Yuan in Shanghai at email@example.com