Baosteel sought a friendly Aquila deal

The Chinese steel giant hoped it could make a friendly takeover offer for iron ore miner Aquila but, along with its partner Aurizon, was rebuffed.

Over the weekend Chinese steel giant Baosteel, its partner rail freight operator Aurizon and Deutsche Bank tried to talk to Aquila Resources’ board about their $1.4 billion takeover offer for the iron ore and coal miner.

But the prospective acquirers were rebuffed. Baosteel, Aurizon and their advisers decided to move quickly and offer Aquila shareholders $3.40 in cash before the ASX opened for the week.

Since 2009, when Baosteel took a 15 per cent stake in Aquila, the Shanghai-based company has become increasingly frustrated in Aquila’s board, executive chairman and chief executive Tony Poli, who has a 29 per cent stake in the company he cofounded.

Baosteel has been pressing Mr Poli to develop the 2.2bn tonnes of  iron ore deposits in the west Pilbara region and develop the infrastructure to take the iron ore from the ground to port. But Mr Poli has not wanted his company to leverage up to develop the iron ore deposits, nor has he wanted to dilute his equity by selling shares to develop the west Pilbara project.

Discussions between Baosteel and Aquila over west Pilbara, Baosteel felt, had reached an impasse. Baosteel felt they had no choice but to hire Deutsche Bank and lawyers at Minter Ellison to help put together a takeover offer while reaching an agreement with an infrastructure developer and operator, Aurizon, to help transport iron ore 432 kilometres from west Pilbara to the coast.

Aurizon may end up owning the heavy haul rail to a proposed deep-water port to be constructed at Anketell Point on Western Australia’s Pilbara coast near Dampier.

Asian and Australian bankers say Baosteel and Aurizon’s takeover offer for Aquila show that while Australians think the commodity boom is over, Asian companies are still keen to secure assets they see as attractive and vital for their future.   

(Reporting by brett.cole@businessspectator.com.au)

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