A unit of Chinese iron and steel giant Baosteel, Baosteel Resources Australia (BSRA) and Australia’s Aurizon have made a joint takeover offer to buy iron ore developer Aquila Resources in a A$1.4bn ($1.3bn) deal.

If the deal is successful it would be China’s biggest takeover of an Australian mining firm in the past two years and pave the way for a new iron ore export region to supply Asian steelmakers.

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The companies are offering a 38.8% premium on the closing share price of A$2.45 of Aquila on 2 May.

"We believe this is a compelling offer for Aquila shareholders, providing an attractive premium to the current market value of their shares."

Following the proposed deal, Baosteel Resources International will hold around 85% of Aquila, while Aurizon will own the remaining shares. The parties plan to finance the transaction through respective cash reserves and undrawn and available debt facilities.

The acquisition is a part of Baosteel Resources’ strategy for building a global resource business through the development of the West Pilbara Iron Ore project and the Queensland Eagle Downs Hard Coking Coal project.

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The Chinese firm had acquired a 15% stake in Aquila in 2009 however, it later increased its holding in the Australian firm to about 20%.

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Baosteel said in a statement: "We believe this is a compelling offer for Aquila shareholders, providing an attractive premium to the current market value of their shares and certainty of value through an all-cash offer."

Aquila said: "Aquila will form an independent board sub-committee to consider and evaluate the proposal and any resulting takeover offer, and will update shareholders in due course."

Aquila has hired Goldman Sachs as its financial advisor, while Deutsche Bank is advising BSRA.

The offer is subject to various conditions, including approvals by Australia’s Foreign Investment Review Board (FIRB).

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