Baosteel pushes Aquila investors to sell

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Image credit: flickr User: Hagen123

Baosteel and Aurizon have urged shareholders of Aquila Resources to act immediately and accept their $1.4 billion offer, despite Aquila’s advise to hold off as long as possible in case a higher bidder emerged.

Image credit: flickr User: Hagen123
Image credit: flickr User: Hagen123

According to the article on The Australian, Aquila issued a target statement on Friday in which it encouraged shareholders to accept the $3.40-a-share bid in the absence of a superior offer, but also urged investors to wait for a higher bid to emerge.

In response to the statement, the joint bidders reminded investors that the offer would close on 11 July and would not be extended.

Baosteel — which has a 20% stake in Aquila — launched a cash only $3.40 a-share offer last month in a joint-venture deal with coal transporter Aurizon. Its move to acquire Aquila has caught the market by surprise and marked a sudden change in direction for the Chinese miner.

“They have been fairly cautious and conservative over the years, which means they have missed out on some opportunities, but they have also avoided making some bad mistakes,” said China expert Clinton Dines, who ended a 21-year career with BHP as its Beijing-based country head in 2009.

Adertisement

“I think the Aquila move is driven by Bao’s internal requirements for secure iron ore supply for their new plant in southern China and is based on a degree of opportunism brought on by the changing valuations of assets in the market as prices have declined.”

He said the move demonstrated the confidence that comes from having a respectable and capable Australian partner like Aurizon, which is Australia’s largest rail freight operator.

“I fully expect that Bao will not depart from being a fairly careful player and their behaviour as the transaction develops will be slow and possibly a bit hesitant,” Mr Dines added.

“While I’m sure they will get decent counsel from Aurizon, if any major impediments or surprises come up, they are likely to be a bit twitchy. I’m sure it took a lot to get their management to find the nerve to do it.”

An independent expert’s report have found Aquila’s share to be worth from $3.90 to $5.24, significantly above the $3.40-a-share the Chinese state-owned entity and its Australian partner offered.