China's Baosteel has warned Aquila investors that the firm’s major assets could continue to be threatened by poor relations with joint venture partners.
The Chinese state-owned entity, which last week teamed up with Australian rail freight company Aurizon to launch a $1.4 billion bid for Aquila, raised the issue of development risk in its bidder’s statement yesterday.
The bidders said their offer provided investors with a compelling opportunity to realise certainty and significant value for their Aquila shares.
“By accepting the offer you will no longer be exposed to future funding uncertainties associated with Aquila’s large greenfield projects, the West Pilbara Iron Ore project and the Eagle Downs hard coking coal project,” Baosteel Resources chairman Dai Zhihao and Aurizon chief executive Lance Hockridge told shareholders. Aquila needs about $3.7bn funding for the $7.4bn WPIOP and $815 million for Eagle Downs.
The bidder’s statement outlined development risks shareholders could face if the bid didn’t succeed, including the risk that Aquila was unable to progress a feasible rail and port infrastructure solution. It said there was a risk these projects would continue to be threatened by poor relations with joint venture partners and multiple legal and arbitral proceedings.
Aquila Resources continued to recommend its shareholders take no action on the bid while its independent board subcommittee reviewed the offer and it awaited an independent expert report. It said the subcommittee and the expert’s recommendations would be “ clearly set out in the target’s statement”.
Aquila said that given the bidders still required approval from the Foreign Investment Review Board, it seemed likely the offer period could be extended.
“Reviewing and responding to a takeover proposal requires extensive consideration,” Aquila general manager, finance and corporate, Martin Alciaturi, said.
Baosteel also told shareholders that given it was the second largest Aquila shareholder, with about 19.8 per cent of the stock, it believed the likelihood of a superior rival bid was low.
The market is tipping an increase in the $3.40-a-share the Chinese firm is offering to control Australian iron ore and coal assets.