Due to the opposition of the Mongolian government, China Aluminum (60 1600. SH/02600。 HK) reluctantly announced the acquisition of South Gobi (0 1878. HK) failed.
China Aluminum announced on the evening of 3rd that after careful consideration, both the company and Ivanhoe Mining believe that it is unlikely that some of the proposed tender offer transactions will get the necessary regulatory approval within an acceptable time. Therefore, both parties have terminated the lock-in agreement, including the obligation to terminate part of the company's tender offer.
South Gobi is registered in Canada, and there are coal resources in Mongolia near the border with China. Its main business is to explore and develop these coalfields and supply coal products to China. On April 4th this year, China Aluminum announced that it planned to invest no more than US$ 654.38 billion to acquire no more than 60% but no less than 56% of the South Gobi common stock held by shareholders such as Ivanhoe Mining, so as to promote the integration of the company's coal and aluminum business.
However, things suddenly changed. On April 17, the Mongolian Bureau of Mineral Resources announced that it would suspend the exploration and mining activities of multiple licenses owned by companies affiliated to South Gobi for national security reasons. As a result, the acquisition plan of China Aluminum was blocked. On July 3rd, China Aluminum announced that the tender offer would be postponed for 30 days. On August 2nd, the tender offer was postponed for another month until September 4th. Now that the deadline has come and things have not progressed, Chinalco has no choice but to give up.
The failure of the acquisition stems from the opposition of the Mongolian government. Alex Molyneux, chief executive of South Gobi, said last month that the Mongolian government had blocked the deal many times, and its intention to make it impossible was obvious.
On May 17 this year, the Great Hural of Mongolia passed the Law on Coordination of Foreign Investment Strategic Fields, and mineral resources were identified as strategic fields. Therefore, foreign investors, their stakeholders and third parties need to apply to the Mongolian government for signing stock trading or transfer agreements through enterprises registered in Mongolia. More than 49% of foreign shares need to be submitted by the government to the State Great Hural for discussion and decision.
However, an official of Mongolia's Ministry of Foreign Relations said that the adoption of the above-mentioned law was not aimed at the acquisition of China companies. But the fact is that in recent years, the Mongolian government has increasingly strengthened its control over domestic resources, which has hindered the mergers and acquisitions of many Chinese-funded enterprises. Previously, Shenhua Group's bid for the mining right of Taben Tolgoi in Mongolia was also rejected because of the opposition of the Mongolian government.
China Aluminum is also not doing well in overseas mergers and acquisitions. At the beginning of 2009, the financial crisis raged and the global mining giant Rio Tinto was in trouble. China Aluminum's parent company, China Aluminum, plans to subscribe for convertible bonds, establish a joint venture with Rio Tinto on iron ore, copper and aluminum assets, and * * * spend $ 195 million to acquire a 0/9% stake in Rio Tinto/kloc-0. In June, Rio Tinto broke the contract, and this huge deal that attracted worldwide attention failed. These cases have exposed the difficulties faced by China enterprises in purchasing resources overseas.
On the 3rd, China Aluminum A shares closed at 5. 14 yuan, down 0.39%; H shares closed at HK$ 2.92, down1.68%; South Gobi shares fell 5.568% to HK$ 20.35, nearly 70% lower than the previous purchase price of China Aluminum.