Sundance may walk away from Hanlong PUBLISHED: 0 hour 8 MINUTES AGO | UPDATE: 0 hour 4 MINUTES AGO Share Links: email
The Sundance Resources board may consider terminating its $1.3 billion takeover deal with Sichuan Hanlong Group after the suitor’s chairman, Liu Han, was detained in China.
The deal, which has been two years in the making, hangs in the balance and sources said Sundance, under a revised scheme implementation agreement, now had the right to terminate.
E.I.M. Capital director Tony Wiggins said investors had lost patience with Hanlong and confidence in Chinese companies because of the Sundance saga. “It’s been a two-year takeover that was never even a takeover, it was all smoke and mirrors,” Mr Wiggins said.
The reasons for Mr Liu’s arrest remain unclear but China Securities Journal said it appeared to relate to his interests in Macau casinos.
Sundance chairman George Jones and managing director Giulio Casello were due to meet with Hanlong officials in Perth on Thursday after a scheduled meeting with the National Development and Reform Commission in China was cancelled. By Thursday afternoon it was still unclear who from Hanlong would be attending the meeting, although it was believed that the privately owned Chinese company said it was keen to continue talks.
Sundance agreed to a drop in the bid price from 57¢ to 45¢ last August as iron ore prices plunged. The move angered some investors, who questioned Hanlong’s excuse: that China’s National Development and Reform Commission had ordered the bid price to be lowered. “Who’s going to deal with Chinese corporations in future?” Mr Wiggins said. “As a specialist resource sector investor we’re a bit dismayed with the whole process. It’s nothing more than a nuisance and it stops the company progressing the plan to develop the assets.”
Mr Liu was believed to have upset some of the highest echelons in China’s government when he lodged the original bid for Sundance in competition with state-owned enterprises. While the takeover deal continued, it was never clear whether Hanlong had the backing of Chinese regulators and financiers to do the deal.
“Look at how long the due diligence period has taken for China Development Bank: it’s telling you something about what they think of Hanlong’s ability to develop, rather than flip, the asset,” said one close observer from Shanghai. Mr Wiggins said Sundance’s share price would not necessarily suffer if it walked away, given it is so far beneath the bid price. It was suspended from trading at 21¢ on Wednesday.
SDL Price at posting:
21.0¢ Sentiment: None Disclosure: Held
