Sundance Scraps Hanlong’s $1.18 Billion Iron Ore Takeover

Sundance Resources Ltd. plunged by a record in Sydney trading after scrapping a A$1.14 billion ($1.19 billion) takeover agreement with Sichuan Hanlong Group.

The stock fell 48 percent to 11 Australian cents at the close of trade, valuing the company at A$338 million and cutting Hanlong’s holding to about A$47.7 million, according to data compiled by Bloomberg. Hanlong paid A$191 million for 433.8 million shares in 2011.

Sundance, which yesterday terminated the accord after Hanlong was unable to secure funding, said it’s in talks with other groups for a stake in its $4.7 billion African iron ore project. The collapse of the deal, first agreed in October 2011, comes after Hanlong’s billionaire Chairman Liu Han, 47, was reported to have been detained last month by police in China.

“Hanlong has lost a lot of their investment in Sundance, that’s creating an overhang in the shares,” Gavin Wendt, a director at Mine Life Pty said by phone from Sydney. “The market is going to be expecting Hanlong to want to find a buyer for their stake, but who is going to purchase that?”

Hanlong, which was seeking to buy the shares it didn’t already own in the Australian company, was also unlikely to meet other required conditions, Perth-based Sundance said yesterday in a statement. Sundance is in talks with other Chinese and non-Chinese parties, it said, without naming them. Buying Sundance would have given Hanlong control of the Mbalam iron ore project that straddles the Republic of Congo and Cameroon.

More Valuable

“The board of Sundance believes it is in its shareholders’ best interests to terminate the agreement,” Chairman George Jones said in the statement. “Sundance’s Mbalam-Nabeba project is significantly more valuable today than when the Hanlong bid was first made.”

Shares of Sundance resumed today after being halted from trading since March 19 at 21 Australian cents, 53 percent lower than Hanlong’s revised offer of 45 cents a share, indicating some investors didn’t expect the deal to succeed.

“For certain, the stock is going to be under pressure,” said Matt Fernley, an analyst at GMP Securities Ltd. in London. “It’s going to take a while for the dust to settle in terms of what are the additional potential bidders out there.”

Liu is being held for helping his brother Liu Yong evade capture over a 2009 triple murder, state media reported last month. Liu and his ex-wife were detained in Beijing at the end of the annual meeting of China’s legislature, according to a March 20 report in Shanghai Securities News that cited unidentified people familiar with the matter.

Missed Deadline

Closely held Hanlong, which owns about 14 percent of Sundance according to data compiled by Bloomberg, advised Sundance it wouldn’t meet a March 26 deadline to deliver a term sheet from Chinese banks to buy the company, the Australian company said that day. An earlier deadline for a term sheet was extended in December. Sundance said on April 5 a good faith consultation period with the Chinese company had ended.

Hanlong, an investor in highways and power projects, cut its offer to 45 cents in August, from the 57 cents agreed in October 2011. It had made an initial offer of 50 cents in July 2011.

“They have to start from scratch now when economic conditions are a lot more difficult,” said Mine Life’s Wendt. “It’s not going to be easy for them to go out there to find investors because of the more concerning outlook for iron ore demand and iron ore prices and it’s significantly harder to attract funding for high capex projects.”

High Profile

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 last month, both promising to get tough on corruption.

Liu Han was ranked the 230th richest person in China with a 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.

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