Revised Sundance offer tipped amid speculation of 45c a share offer
by: Sarah-Jane Tasker From:The Australian August 15, 201212:00AM
SUNDANCE Resources is expected to update the market today on price negotiations with Hanlong Group, as the Chinese company moves to secure a 21.5 per cent drop in its offer price for the African-focused iron ore miner.
The Chinese suitor has been pushing to significantly reduce its recommended 57c-a-share offer, after it received provisional approval earlier this month from China's top economic planner after the condition of the bid price was reviewed.
Market speculation had suggested the renewed offer was as low as 40c a share, but it was rumoured yesterday that 45c was now on the table.
Sundance did not comment on the market speculation yesterday.
An offer of 50c a share was proposed in July last year, but the Sundance board rejected it and then a revised bid of 57c was backed by the target in October, valuing the company at $1.7 billion.
If a 45c revised offer is announced today, it values Sundance at $1.37bn. Sundance shares last traded at 33c, before it suspended its shares from trading pending the outcome of the negotiations.
While the board would be unhappy with a price below 50c, market conditions, a softening iron ore price and the threat of hedge funds dumping the stock should the bid be pulled will likely see it recommend a reduced offer.
When Sundance's entire board was killed in a crash in 2010 while members were visiting the flagship Mbalam project on the borders of Congo and Cameroon, the stock hit 13c.
Mining billionaire Ken Talbot was on board and his estate sold out of the company last year, when Hanlong purchased its 16 per stake at 44c. Sydney-based Fortitude Capital managing director John Corr, a Sundance shareholder, told The Wall Street Journal the majority of existing shareholders would welcome a discounted deal.
"The price has been telling you there will be no deal at all, so a deal at 45c isn't disappointing given what's happened in the sector," Mr Corr said.
"This transaction might change the approach Australian companies have to Chinese corporates as buyers of assets."
Even if the board recommends a reduced offer, the deal still needs the approval of shareholders, who will ultimately hold the final decision when it goes to a vote.
Hanlong wants control of the Mbalam iron ore project.
The development will include a new deepwater port and heavy haulage railway connecting the mines to the port, which is expected to cost about $5bn.
The conditions placed on Hanlong by China's National Development and Reform Commission also included Hanlong securing equity and debt funding to develop the $5bn project.
Since the deal was first signed last July, Sundance has increased its resource base by 50 per cent and received mining approvals for the projects.
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