PanAust Agrees to A$1.2 Billion Bid From Guangdong Rising Assets Management
Move will see ownership of several copper and gold deposits in Asia move into Chinese hands
Rhiannon Hoyle And David Winning | Wall Street Journal
PanAust Ltd. agreed to a takeover by Guangdong Rising Assets Management that values the Australia-listed miner at around 1.20 billion Australian dollars (US$950 million), ending a rare hostile move by a Chinese company to acquire overseas resources assets.
The deal, if approved by PanAust’s shareholders and regulators, will see ownership of several copper and gold deposits in countries from Laos to Papua New Guinea move into Chinese hands.
On Friday, independent directors of PanAust Ltd. said they would recommend investors back a revised offer from GRAM worth A$1.85 a share. The higher bid represents an 8% increase on GRAM’s previous A$1.71-a-share bid, which had been rejected by PanAust as too low.
GRAM, which owns around a quarter of PanAust and has been a shareholder since 2009, had freed its original bid from conditions entirely in an effort to win support of other investors. However, a lack of acceptances prompted GRAM to re-engage PanAust directors in an effort to win their support for a deal.
It comes less than a year after PanAust acquired a majority stake in the Frieda River copper-gold deposit in Papua New Guinea, which it bought from Glencore PLC and aims to develop at a cost of more than US$1.5 billion. Frieda River is one of Asia’s biggest undeveloped copper deposits.
A successful takeover would also increase China’s influence in Laos. PanAust is already one of the biggest miners in the Southeast Asian nation of Laos, and runs the Phu Kham copper-gold mine and Ban Houayxai gold-silver mine. In recent years, it has accounted for roughly 7% of the country’s gross domestic product and nearly a third of its exports.
China Minmetals Corp. took control of Laos’ other big copper mine, Sepon, when it acquired a suite of assets from OZ Minerals Ltd. in 2009.
GRAM is aiming to acquire the Southeast Asian copper deposits at a time when many analysts are forecasting rising demand and prices of the industrial metal, fueled by China’s own expanding middle class. China is the world’s biggest buyer of commodities such as copper, which is used in everything from cookware to air-conditioners and electrical wiring.
GRAM, advised by J.B. North and Co., has repeatedly tried to acquire the company. In May last year, the Chinese company made an initial bid worth A$2.30 a share but couldn’t convince PanAust’s directors to support a deal.
GRAM returned earlier this year with the A$1.71-a-share offer. In rejecting that bid, PanAust said it was timed to coincide with its share price, and spot prices for copper and gold, trading near multiyear lows.
An independent assessment commissioned by Brisbane-based PanAust later put a fair price on its stock at between A$1.84 and A$2.04 a share. PanAust was advised by Rothschild in its discussions with GRAM.
PanAust has been grappling with weaker commodity markets that have squeezed earnings, prompted write downs and job cuts, and forced the miner to scrap its dividend. While PanAust executives said other companies had expressed interest in its assets, analysts said it would be difficult for any competing bid to succeed given GRAM’s existing large stake in the miner.