Shares in takeover target Aquila Resources continue to hover comfortably above China’s bid price as the market continues to bet on a sweetened offer.
Chinese state-owned entity Baosteel launched a $3.40-a-share bid for Aquila on Monday last week in a $1.4 billion move to secure ownership of significant iron ore and coal assets in Australia.
Shares in Aquila have traded above the bid price since it was launched and yesterday the stock closed up 1.75 per cent at $3.48.
Analysts have said that an increase in the original bid would be needed to gain the support of company founder and executive chairman Tony Poli, who controls about 30 per cent of the stock. But the Chinese, which have teamed up with Australia’s Aurizon in a joint bid, set a minimum acceptance level at 50 per cent, meaning they can take control of the company without Mr Poli’s support.
The Aquila board has yet to formally respond to the offer as it is awaiting the bidder’s statement. But it has told shareholders to take no action and established an independent committee to review the offer.
Junior iron ore hopefuls in Western Australia that surround Aquila’s $7.4 billion West Pilbara iron ore project are watching the transaction closely, as the promise of independent third-party infrastructure in the region could be a game-changer for some.
In the deal Aurizon stands to gain a 15 per cent stake in Aquila, which it will later divest, and exclusive rights to negotiate to develop a multi-user rail and port.
A Wood Mackenzie report said the bid had the potential to transform the iron ore industry.
“Developing iron ore infrastructure is a good fit for Aurizon because it can replicate its proven coal business model of multi-user rail infrastructure in the Pilbara iron ore region,” the report said.
“The entrance of Aurizon into Pilbara region iron ore infrastructure has the ability to transform project development in the region by making it possible to develop small and medium-sized iron ore mines.
“In the past, many of these projects stalled due to both their geographic isolation and the heavy capital investment required to build port and rail infrastructure.”