Baosteel Faces Hurdle in Aquila Bid After Rival Stake PurchaseJames Paton
China’s Baosteel Group Corp.’s bid for an Australian iron ore project developer hit a hurdle after a potential rival took a 12 percent stake in its target.
Aquila Resources Ltd. rose to a two-year high in Sydney, noting speculation that Mineral Resources Ltd. had bought the stake. Mineral Resources, a contract mining company, had its shares halted from trading today.
Baosteel, the owner of China’s biggest listed steelmaker, and Aurizon Holdings Ltd. last month offered to buy Aquila in a deal that valued the Australian company at A$1.4 billion ($1.3 billion.) They would get a half stake in the A$7.4 billion West Pilbara iron ore mine, port and rail project in Australia.
“This looks like a strategic shift in thinking if they are looking to take a tilt at Aquila,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone, citing Mineral Resources’ A$1.9 billion market value. “The possibility they’re seeking a seat at the table or some bargaining leverage is just as plausible as a takeover offer.”
Aquila climbed 3.4 percent to close at A$3.61 in Sydney trading, the highest since May 2012.
Almost 50 million Aquila shares traded today at A$3.75 a share. That’s 10 percent more than Baosteel and Aurizon’s cash bid last month of A$3.40 a share. Mineral Resources bought 12 percent of Aquila, the Australian Financial Review reported today, without saying where it got the information.
Aquila’s independent board sub-committee welcomed the recognition that the value of the company’s shares is well in excess of the A$3.40 a share conditional cash bid by Baosteel and Aurizon, the company said. It’s advising holders to take no action on the offer pending a formal recommendation.
Baosteel owns about 19.8 percent of Aquila, while founders Tony Poli and Charles Bass own about 40 percent, according to data compiled by Bloomberg.
Aquila doesn’t know the identity or intentions of the buyer, which is required to file a shareholder notice by 9:30 a.m. Sydney time tomorrow, the Perth-based company said today in a statement.
The Baosteel offer signaled a possible resumption of Chinese companies buying up global resources to take advantage of a price slump. Iron ore fell into a bear market in March amid a credit squeeze and rising stockpiles.