The parties are offering $3.40 cash per share in an off-market offer, representing a 38.8% premium to Aquila’s Friday closing price and a 32.3% premium to the three-month volume weighted average price of Aquila shares.
Aquila received the proposal on Saturday morning in which the bidders requested discussions before making this morning’s announcement.
Given the short notice, no discussions have taken place and Baosteel chairman Zhihao Dai said the bidders decided to put the offer directly to shareholders.
“We believe this is a compelling offer for Aquila shareholders as it provides an opportunity for them to realise certain value for their Aquila shares at a significant premium to current market prices through an all-cash offer, at a time of uncertainty of the funding and development pathway for Aquila’s suite of greenfield projects,” he said.
Baosteel took a 15% stake in Aquila in 2009 and entered into a memorandum of strategic cooperation over Aquila’s projects, including the West Pilbara iron ore project (WPIOP).
The Chinese company upped its stake in Aquila to 19.8% in on-market buys in November and December of this year.
Aquila said today that there had been discussions between the two regarding the WPIOP, but the takeover offer was a surprise development.
If the bidders are successful, Baosteel will own 85% of Aquila, with Aurizon to hold the balance, while Aurizon will hold 10% if acceptances are between 50% and 90%.
Aquila will form an independent board sub-committee to evaluate the offer and has appointed Goldman Sachs as its financial advisor and King & Wood Mallesons as its legal advisor.
It has advised its shareholders to take no action in the meantime.
The bid comes after reports by The West Australian earlier this month that Baosteel was in advanced talks to buy a 50% stake in the $7.4 billion WPIOP from Aquila’s partner, US-based AMCI.
The project is construction-ready with all approvals received, but the partners have been in a standoff over budgets, meaning work has slowed.
It was also reported that WA Premier Colin Barnett met with Baosteel in China over the Anketell port development, which is a vital part of the WPIOP development.
“Last week I was in China and there is a new attitude there under the new leadership,” Barnett told media at an office opening in Perth in April.
“And I’m more confident than I have been about Anketell and, dare I say it, Oakajee.”
Barnett said he was seeing a coordinated push from Chinese authorities that would make these projects more likely.
Aurizon was a surprise participant in the bid, but has made no secret of its desire to make a push into the Pilbara.
“This cooperation represents a co-investment by Australia’s largest rail freight operator and one of China’s leading iron and steel producers to develop quality Australian resources, with potential to develop a new world-class iron ore district in the western Pilbara, supported by an integrated multi-user rail and port solution and to create Australian jobs, boost national exports and deliver to government significant royalty revenues,” Aurizon CEO and managing director Lance Hockridge said.
Aquila also owns 50% of the developing Eagle Downs hard coking coal project in Queensland, 100% of the Washpool hard coking coal project in Queensland, 74% of the Thabazimbi and Northern Cape iron ore projects and Avontuur manganese project in South Africa.
The company also had cash reserves and liquid investments of $507 million at the end of March.
Shares in Aquila remained at $2.45, while Aurizon shares dropped 2.9% to $5.02.
