Tug-of-war

Mumbai, Oct. 7: The Ruias and the Jindals are locked in a fierce bidding war for Australian coke producer Rocklands Richfield. The $18-billion Essar group has launched a surprise $128.1-million bid, seeking to trump a $107.6-million bid by Navin Jindal-run Jindal Steel and Power.

On September 22, Rocklands Richfield signed a term sheet with Jindal Steel under which the Indian company proposed to acquire a 100 per cent stake in the Australian company for 42 US cents per share.

A fortnight later Essar Mineral Resources jumped into the fray with a competing takeover plan at an offer price of 50 cents per share.

A media release by Rocklands Richfield termed Essar’s bid a friendly takeover.

“The directors of Rocklands Richfield will convene a board meeting to consider the merits of both the Jindal and Essar proposals to determine which is superior for the company,” it added.

It informed its shareholders that neither of these were “formal offers” and subject to several conditions, including due diligence.

Commenting on the bids, Rocklands Richfield’s chairman Benny Wu said, “We are very honoured that two of the largest Indian groups are interested in taking over the company. In fact, Jindal Steel & Power has been named as one of the 50 best listed companies in Asia for 2009. Both Jindal and Essar have large and sizeable investments in overseas assets and appear to be seeking to expand their investment in Australia.”

The Essar spokesperson declined to comment.

Several Indian steel makers, have either acquired coal assets abroad or are pursuing access to this raw material in foreign markets.

Media reports from Australia suggest that while Chinese companies have been bullish on Australian mining assets, they have met with a cold response from Australian regulators. The perception is that unlike Indian companies, Chinese firms are largely state-run and, therefore, will not offer competing bids.

As a condition, Essar wants an option to subscribe to up to 15 per cent of the share capital of Rocklands at a price calculated on the last five days weighted average market price of these shares.

Essar has also sought a right—but not an obligation — to increase or match any higher bid by a third party.