DataRoom AM: Aquila curveball

Aquila looks set to turn down Baosteel’s offer after a block trade pushed the share price higher, while David Jones is still trying to figure out what Solomon Lew is up to.

Hopes are rising of a higher Baosteel bid for miner Aquila Resources -- and for good reason. But the chances of a new suitor emerging appear slim.  

Elsewhere, David Jones fails in attempts to discover what Solomon Lew is planning, the IPO market continues to hum along, James Packer and Lachlan Murdoch mull another business deal together and Seven Group’s bid for Nexus Energy is ready to be shot down by shareholders today.

Baosteel’s $1.4 billion bid for Aquila Resources will almost certainly need to be raised if the Chinese firm hopes to get its target after a major block trade in Aquila’s stock was made at a level 10 per cent above the offer price. The 12 per cent stake in Aquila, likely purchased by Perth-based Mineral Resources, helped drive Aquila stock to $3.61 a share, well above the $3.40 hostile bid.

On the surface it is an odd move by the new shareholder, unless it is looking for a bargaining chip to secure contracting work or perhaps teaming with a rival suitor for Aquila ahead of what investors hope could be a bidding war. However, Baosteel controls 20 per cent of Aquila stock, ensuring a rival offer is unlikely to succeed.

Aquila, meanwhile, has yet to officially respond to the Baosteel bid, but yesterday strongly hinted it would reject the proposal, referencing the price paid for stock yesterday as more appropriately representing the value of the firm.

In retail, David Jones has now spent over a week trying to ascertain the identity of new owners of its stock and is no closer to working out whether Solomon Lew has just 0.65 per cent of the company or a stake far more substantial.

The retailer is on edge ahead of a shareholder vote on June 30 to approve the $2.15bn takeover offer from South Africa’s Woolworths and there is a school of thought that Lew is positioning to block the move -- but it’s hard to see it happening at this point.

In the IPO market, the Jan Cameron-backed Bellamy’s Organic is pushing ahead with a $100 million float amid plans to grow the baby food brand in China. It is believed that Cameron will sell $36.6m worth of shares through the IPO ahead of a July listing, with a bookbuild for the listing already heavily oversubscribed.

After a slow start to 2014, the IPO market has burst to life in the second quarter of the calendar year but given the float fatigue we saw after a sustained month or two of rapid-fire floats late last year, investors may be wise to exercise caution in coming months.

Hopes for a successful bid for Nexus Energy by Seven Group remain forlorn as the final proxy votes saw over 25 per cent of shares used to vote down the scheme, with the last hope a change of heart from shareholders at today’s meeting. As that’s a very unlikely circumstance, Seven will probably be left to try and claim the group’s assets out of the hands of receivers in coming months.

In infrastructure, industry super fund REST has dropped out of the race for Melbourne’s East West Link development, according to The Australian Financial Review. REST reportedly exited the Inner Link consortium on fears the cost made the project too high risk and has been replaced in the group by Uberior Infrastructure Investments. The news comes just over a fortnight prior to the Victorian government cutting the number of groups in the running from three to two.

Meanwhile, James Packer and Lachlan Murdoch are close to securing a stake in peer-to-peer lender SocietyOne, the AFR reports. The rich-listers would join Westpac as a key stakeholder in the fledgling business.

Finally, Ramsay Health Care and joint venture partner Credit Agricole Assurances have claimed control of French private hospital giant Générale de Santé for about $900m, pending regulatory approval. The news comes just a week after doubts were cast over the deal as Ramsay extended the due diligence period.

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