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* Aim to open new iron ore export region in Australia
* Aquila says bid unsolicited, hires Goldman Sachs to advise
* Aurizon sees West Pilbara Iron Ore producing from 2017-18
By Sonali Paul
SYDNEY, May 5 China's Baoshan Iron & Steel Co
Ltd (Baosteel) and Australia's Aurizon Holdings Ltd
launched a $1 billion bid for an Australian resources
firm in a move that could break the stranglehold of giant miners
Rio Tinto and BHP Billiton on
the country's iron ore exports.
Monday's unsolicited A$1.14 billion ($1.06 billion) offer to
take over Aquila Resources Ltd could open up a new
Australian iron ore export region to supply Asian steelmakers,
jumpstarting the $7 billion West Pilbara Iron Ore project
(WPIO), half-owned by Aquila.
Baosteel's move would be the biggest foray into an
undeveloped iron ore project in Australia by a Chinese investor
since CITIC Pacific ran into massive cost blowouts and
delays on the $10 billion Sino Iron project, which started
producing in 2013.
In a statement, Baosteel, China's largest listed steelmaker
and 20 percent owner of Aquila, and rail company Aurizon said
they will offer A$3.40 in cash per share, a 39 percent premium
to Aquila's last closing price. Including Baosteel's existing
stake, the offer values the target at A$1.42 billion in total.
Aquila shares were due to begin trading in Sydney at 11.00
am (01.00 GMT).
The suitors decided to go straight to Aquila shareholders
with an offer on Monday after failing to secure a meeting on
Sunday with Aquila's executive chairman and 30 percent owner,
Aquila said it was approached out of the blue by Baosteel
and Aurizon with the offer on Saturday. The target has appointed
Goldman Sachs to advise on the offer and said it would appoint
an independent committee to evaluate the offer.
If the Baosteel-Aurizon bid is successful, and feasibility
studies prove the West Pilbara Iron Ore project to be
commercially viable, the partners expect to start producing iron
ore in 2017-18, Aurizon Chief Executive Lance Hockridge told
reporters on a conference call.
Hockridge shrugged off market concerns of an oversupply of
iron ore, saying Baosteel is a growing producer and will need
more iron ore and coking coal for its mills. South Korean steel
giant POSCO is also a stakeholder in the WPIO
"They continue to look for sources of quality supply at
competitive rates to underpin their growth," Hockridge said of
Baosteel's motivation for the deal.
A successful bid would also give Baosteel a stake in the
Eagle Downs hard coking coal project that Aquila is developing
with Brazil's Vale SA.
Aurizon, advised by UBS, said it would acquire 15 percent of
Aquila if the deal was successful. It aims to take a majority
stake in port and rail infrastructure for the WPIO iron ore
Baosteel is being advised by Deutsche Bank.
($1 = 1.0795 Australian Dollars)
(Reporting by Sonali Paul; Additional reporting by Lincoln
Feast; Editing by Marguerita Choy and Kenneth Maxwell)