Aquila shares slip as Baosteel shuns higher bid

In the latest twist for takeover target Aquila Resources, suitor Baosteel said it would not increase its $1.4 billion offer for the iron ore developer and that it would reconsider its 20 per cent shareholding in the company if the bid was unsuccessful.

The news from Baosteel sent Aquila’s share price into a nosedive as it dropped to as low as $3 per share after opening the day’s trade at $3.54. The shares closed trading at $3.10 each.

In a joint press release, Baosteel and takeover partner Aurizon said they would not increase the offer price of $3.40 per share, or extend the offer deadline of July 11.

The announcement was prompted after Mineral Resources threw the takeover plan into disarray on Wednesday when it bought a 12 per cent stake in Aquila for $3.75 a share, well above the takeover offer.

That makes it the third biggest shareholder in Aquila behind Baosteel, which has a 19.8 per cent stake, and Aquila’s executive chairman Tony Poli, with a 28.9 per cent interest.

Mineral Resources paid nearly $200 million for the shares and said it made the purchase in a bid to develop and operate Aquila’s West Pilbara iron ore project, which is expected to cost $7 billion to build.

In today’s joint announcement with Aurizon, Baosteel chairman Dai Zhihao said he saw no meaningful prospect of being involved in Aquila’s West Pilbara iron ore project if its takeover bid was unsuccessful.

“In those circumstances Baosteel, and its related entities, would have to carefully consider their ongoing shareholding in Aquila,” Mr Zhihao said.

Aquila said it would consider the announcement and that it would continue to explore all options to maximise shareholders value.

Aurizon chief executive and managing director Lance Hockridge reiterated the joint bidder’s potential for developing the project.

"Baosteel and Aurizon together have the capacity to fund the resources and the genuine capability to progress Aquila’s greenfield projects with the joint venture partners,” Mr Hockridge said.

“Aquila shareholders should also take into account that the iron ore prices have declined by about 15 per cent since the Baosteel and Aurizon offer was announced.”

The West Pilbara iron ore project is 50 per cent owned by Aquila, 25.5 per cent owned by AMCI and 24.5 per cent owned by Posco.

The project is expected to produce 30 million tonnes per year of iron ore, which will be linked by a 245-kilometre rail line to a proposed port at Anketell Point.