Baosteel brinkmanship wins the day

Aquila has bowed to the offer from Baosteel and Aurizon after the bidders threatened to walk away.

Tony Poli has blinked. In the face of Baosteel'’s threatened withdrawal, he has backed down and accepted its $3.40 a share bid for his company Aquila Resources.

In doing so he has given Minerals Resources boss Chris Ellison a problem because his $3.75 conditional scrip bid was deemed inadequate in the absence of a rival cash bid.

This gives Ellison the option of sitting there with 12 per cent in a company controlled by Baosteel or taking the loss and accepting $3.40 each for the 49 million shares he paid $3.75 for last week.

Baosteel won the day with last week’s declaration that its $3.40 a share offer was final. That gave Poli a clear choice and certainty and he has decided he won’t get a better offer, so the best way to get his iron ore project off the ground was to jump into bid with the Chinese steel major and Aurizon.

In the scheme of things this was a smart choice and tactically Baosteel has played the game superbly.

Talk of any deal between Poli and Ellison was clearly aimed just at getting a better bid on the table and in the end that failed to materialise.

Now comes the hard part — actually putting its plan into action.

In concept it is an important breakthrough with a Chinese steel mill taking a direct interest in a rival project to the two iron majors, BHP and Rio Tinto, and indeed the so-called third force of Fortescue Metals.

It is also a boon to Aurizon boss Lance Hockridge because, presuming the deal goes ahead as planned, he will have the chance to develop the port and rail project.

Mineral Resources’ Ellison can plead for part of the action on the port build, but he will be coming very much from left field having attempted to upset the Baosteel bid.

Deutsche Bank advised Baosteel and Goldman Sachs advised Aquila Resources.