China’s Hanlong Makes A$1.2 Billion Bid for Rest of Sundance
July 18, 2011, 4:04 AM EDTBy James Paton and Soraya Permatasari
(Updates to add closing share price in fifth paragraph.)
July 18 (Bloomberg) -- Sichuan Hanlong Group offered A$1.2 billion ($1.3 billion) in cash for the rest of Sundance Resources Ltd. to gain control of the Australian company’s iron ore project in West Africa.
Hanlong, which owns 18.6 percent of Sundance, offered 50 cents a share for the Perth-based company, valuing it at A$1.4 billion, Sundance said today in a statement. The offer is priced 25 percent higher than Sundance’s close on July 15.
Buying Sundance will give Hanlong control of the $4.7 billion Mbalam iron ore mine, port and railroad project that straddles the border of Cameroon and Republic of Congo. The Chengdu-based company said last year it will invest as much as A$5 billion in resource assets to feed surging demand for commodities in the world’s fastest-growing major economy.
“It’s a trend that we’ve seen and it’s now well developed over the last couple of years,” said David Lennox, a mining analyst at Fat Prophets. “They believe their country requires considerable resources going forward just to maintain stable growth for many years to come.”
Sundance climbed as much as 23 percent to 49 cents at the 4:10 p.m. Sydney time close. Sundance is being advised by UBS AG, Clayton Utz and Citic Securities Co. Bank of America Merrill Lynch and Mallesons Stephen Jaques have been appointed by Hanlong as financial and legal advisers, Hanlong said in a separate statement.
No Action
Sundance advised shareholders to take no action, saying the bid undervalues the company and that the board “intends to engage in discussions with Hanlong about the terms of its proposal,” according to the statement.
The bid follows Hanlong’s A$143 million offer for Australian uranium developer Bannerman Resources Ltd. on July 11. Hanlong also owns a 53.82 percent stake in Australian molybdenum prospector Moly Mines Ltd., according to data compiled by Bloomberg.
The offer is priced at 47 percent more than Sundance’s weighted average share price over the past 20 trading days, according to data compiled by Bloomberg. That compares with the average premium of 26 percent for takeovers of iron ore companies worth more than $1 billion over the past five years.
Typical Premium
“We’ll need to be able to see what the offer works out over time but” a typical premium associated with takeover bids is probably around 30 percent to 40 percent, Peter Rudd, mining and resources manager at Armytage Private Ltd. in Melbourne said by phone.
There have been $6.9 billion worth of bids for iron ore producers this year, excluding the Sundance offer, according to data compiled by Bloomberg. That’s the most since 2008 when deals worth $8.4 billion were announced.
Sundance, which is also seeking partners to help fund the project, said it will continue talks with potential partners, the statement said.
--Editors: Andrew Hobbs, Keith Gosman
To contact the reporters on this story: James Paton in Sydney at jpaton4@bloomberg.net; Soraya Permatasari in Melbourne at soraya@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net; Rebecca Keenan at rkeenan5@bloomberg.net
