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China queers Jindals' Aussie pitch

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By SAMBIT SAHA in Calcutta
  • Published 5.11.09

Calcutta, Nov. 5: Jindal Steel & Power Limited has a new competitor in the race to acquire Australian coal miner Rocklands Richfield.

China’s Meijin Energy Group has come up with a higher offer, which has found favour with the existing management of Rocklands.

The Australian company has asked Jindal Steel to come back with a matching or higher bid, otherwise, it would terminate the ongoing discussions and allow the Chinese player to start exclusive talks.

Meijin is the third company to bid for Rocklands in as many months — India’s Essar Group had thrown its hat in the ring but soon opted out, leaving Naveen Jindal’s JSPL alone in the race.

Meijin Energy has offered to pay Australian dollar (AUD) 0.52 a share for Rocklands, higher than the AUD 0.42 being offered by JSPL.

Incidentally, Essar had offered AUD 0.50 a share for the Australian company but it did not receive formal support from the Rocklands management.

A Rocklands notice to the Australian Securities Exchange said it had received the Meijin bid on November 2, and after “careful consideration” it found that the bid was “superior” to the Jindal offer, which is 37 per cent lower.

However, the Rocklands board told its shareholders that neither the Jindal nor the Meijin proposals were formal offers at this stage. They are preliminary in nature and subject to due diligence, it said.

JSPL is carrying out a due diligence exercise after both parties signed a term sheet on September 22. According to the pact, Jindal was to complete the due diligence by October 31 and negotiate an implementation agreement by November 15.

On October 28, JSPL sought another month to complete the due diligence and sign the deal by December 15.

JSPL plans to invite Rocklands chairman Benny Wu to India for deliberations after it finishes its groundwork.

JSPL vice-chairman Naveen Jindal plans to visit Australia and China — where Rocklands has large operations — reflecting the Indian company’s keenness and commitment to the proposal.

Before the Meijin proposal came, both Rocklands and JSPL had agreed to extend the due diligence date to November 24 and seal the deal by December 8.

However, JSPL now faces the risk of being beaten by the Chinese company, which claims to be one of the biggest coke producers in China owning 10 coal mines with a combined reserve of 2 billion tonnes. The Meijin proposal values Rockland at AUD 200 million.

JSPL is one of the largest steel long products manufacturers in India with a mill in Chhattisgarh. It also runs a power plant there. The company is building a plant in Orissa and also expanding its power plant capacity in Chhattisgarh.

As the bid battle continues, JSPL has built up a strong position in Rocklands. It now holds a 14.16 per cent stake in the company. The shares were bought in three tranches from the open market and at a price lower than its own offer and that of Meijin.

Rocklands has two main assets — met coke plants in China and coal mines in Australia.