Chinese firms more aggressive in hunt for Australian resources

PUBLISHED : Thursday, 15 May, 2014, 2:59pm
UPDATED : Friday, 16 May, 2014, 12:03am

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 have seen two US$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 JP Morgan, who works on metals and mining deals.

Baosteel's bid for coal and iron ore developer Aquila Resources 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 per cent owner, Tony Poli.

Aquila had no immediate comment on a formal bid document released on Wednesday by Baosteel, which owns 20 per cent of the company.

Guangdong Rising's proposed takeover bid for PanAust 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 (HK$516 million) takeover of coal explorer Carabella Resources by China Kingho Energy in February.

The deal was sealed in just two months, with 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.

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, which holds massive coal deposits.

Chinese acquirers have had their jobs made easier by a slump in commodity prices that has dragged mining stocks down.