(Updates to add closing share prices in fifth paragraph.)
June 18 (Bloomberg) -- China’s Baosteel Group Corp. is closer to gaining a slice of a planned A$7.4 billion ($6.9 billion) iron ore project in Australia after knocking out a rival in a takeover battle.
Aquila Resources Ltd., owner of a half stake in the project, today recommended Baosteel’s A$3.40 cash a share offer over a conditional A$3.75 share proposal from Mineral Resources Ltd. Baosteel and partner Aurizon Holdings Ltd.’s bid values Aquila at about A$1.4 billion.
Baosteel turned up the pressure on Aquila last week by saying it wouldn’t raise its offer after Mineral Resources crashed the takeover by taking a 12.8 percent stake in Aquila. Baosteel, owner of China’s biggest listed steelmaker, wants to kick start the West Pilbara development to feed steel demand in China, the world’s biggest market.
Baosteel is seeking “control of the project, to build on that base and secure additional supply,” Mathew Hodge, a Sydney-based analyst at Morningstar Inc., said today by phone.
Aquila rose 7 percent to close at A$3.35 in Sydney trading, while Mineral Resources fell 2.1 percent to A$9.35, the lowest in 11 months.
Tony Poli, chief executive officer of Perth-based Aquila who owns about 29 percent of the company, intends to accept the Baosteel offer in the absence of a higher bid, according to a statement today.
China’s steel output may reach 1.1 billion metric tons in the next 10 years driven by urbanization, BHP Billiton Ltd., the world’s biggest miner, said this month. That would be 41 percent more steel than it made last year.
Mineral Resources bought the stake to get a seat at the table in the development of the project, jointly owned by AMCI Inc. Mineral Resources said today it remains prepared to hold talks about the future of the project.
For Aurizon, “iron ore is all about scale,” Morningstar’s Hodge said. “You need a big project to underpin that scale. Once you have that, you can add volume at a fairly incremental cost.”