| MELBOURNE/HONG KONG
MELBOURNE/HONG KONG The days when Australian mining magnates could dictate terms to Chinese buyers are over.
A string of unsolicited takeover bids this year show that now the commodities boom has cooled, Chinese acquirers are willing to bypass local tycoons and boards to go direct to shareholders.
Underscoring China's impatience with the pace of development of mines and the opportunity afforded by a slump in Australian resource stocks, the past two weeks alone have seen two $1 billion unsolicited bids from state-owned firms eager to gain full control over companies they have sizeable stakes in.
And if those firms, Baosteel Resources and Guangdong Rising Assets Management, prove successful, the deals could become the catalyst for more Chinese acquirers to follow suit.
"This may get the wheels turning where other Chinese companies are sitting with big stakes and have an inside track," said Paul Donnelly, executive director at JPMorgan, who works on metals and mining deals.
Baosteel's bid for coal and iron ore developer Aquila Resources Ltd AQA.AX is being seen as particularly unfriendly and likely to face stiff opposition. The steel giant made the offer after failing to secure a meeting with Aquila's executive chairman and 29 percent owner, Tony Poli.
Aquila had no immediate comment on a formal bid document released on Wednesday by Baosteel, which owns 20 percent of the company.
Guangdong Rising's proposed takeover bid for PanAust Ltd PNA.AX has been rejected by the copper miner as too low, although the Australian firm has agreed to open its books to its biggest shareholder in the hope of securing a better offer.
These bids follow several smaller unsolicited offers, including the successful A$71 million takeover of coal explorer Carabella Resources by China Kingho Energy Group in February.
The deal was sealed in just two months, with China Kingho going straight to shareholders after failing to win the support of the coal explorer's board. It eventually won the board over with a sweetened offer.
Chinese acquirers have certainly had their jobs made easier by a slump in commodity prices that has dragged mining stocks to their lowest levels in nearly five years.
Regulatory change is also set to play its part, with China relaxing outbound takeover rules last month to allow companies making acquisitions below $1 billion to proceed without seeking approval from the National Development and Reform Commission. The previous threshold for resource companies was capped at $300 million.
Chinese acquisitions have fallen steeply in both number and value in recent years, with just $2.7 billion worth in enterprise value announced last year compared to $6.2 billion in 2009, according to Thomson Reuters data.
Financial sources say these new unsolicited bids show Chinese firms have become more savvy in chasing Australian acquisitions and more determined to get more out of their assets.
Contrast that with the peak of Asian investment in Australia about five years ago, when iron ore and coal prices were soaring and buyers were willing to pay whatever it took to get their hands on undeveloped assets.
Tycoons like Gina Rinehart, Andrew Forrest, Clive Palmer and Linc Energy's Peter Bond minted billions of dollars selling stakes to Chinese and Indian firms in iron ore assets in Western Australia and projects in Queensland's Galilee Basin, where massive coal deposits have yet to be mined.
"There is a sense of frustration setting in now," said Viral Gathani, head of energy, resources and infrastructure at CIMB Investment Banking in Hong Kong.
"The general feeling among Chinese elite is that some of the overseas M&A in resources in the past decade hasn't achieved the desired impact for China," he added.
Baosteel, for example, said its takeover bid was prompted by impatience with Aquila in failing to develop the $7 billion West Pilbara Iron Ore project, which could help open up a new iron ore export region to supply Asian steelmakers.
"A lot of the deals in the past have been about securing a foothold on a large ore body. The focus is shifting to getting ore bodies to market at a quicker pace," said Jock O'Callaghan, Australian mining leader at consultants PwC.
Zijin Mining's (601899.SS) (2899.HK) Australian arm Norton Gold Fields NGF.AX said it made an unsolicited A$24 million bid for Bullabulling Gold Ltd BAB.AX last month after an earlier approaches to the company were knocked back.
"We thought it was worth buying the asset without doing any sort of inside-the-tent due diligence, and also were confident enough to think that our bid should be taken seriously. If we tried to negotiate a bid with these guys we'd have got nowhere," said RFC Ambrian executive director Stephen Allen, Norton Gold's adviser.
Bullabulling's directors have countered in a letter to shareholders that the bid is opportunistic and does not reflect the real value of the company.
(Additional reporting by Byron Kaye; Editing by Edwina Gibbs)