A China-based consortium led by Baosteel Group is moving closer to obtaining a stake in Aquila Resources' $6.9bn iron ore project, which is under development in Australia.
Aquila Resources, which owns half of the project, has confirmed that the consortium's $1.3bn takeover bid exceeds other offers and has recommended for its shareholders to accept the A$3.40 cash per share proposal.
The offer has been made jointly by the consortium's Baosteel and Aurizon Holdings, to acquire 100% of the company's ordinary shares.
The move comes after talks failed between Aquila and Mineral Resources for a A$3.75 a share deal.
Earlier in June, Mineral Resources had acquired a 12.78% stake in Aquila to improve its prospect in the bid.
Aquila's Independent Board Committee (IBC) has advised shareholders that it will recommend for them to accept Baosteel's offer, in the absence of a superior proposal.
Further, the company's executive chairman and CEO Tony Poli, who holds a 28.92% stake in the company, has stated that he intends to accept the deal, if no better offer is available.
Baosteel Resources International chairman Dai Zhihao said Aquila's recommendation to its shareholders is a welcome development, recognising the compelling nature of the company's all cash offer.
"If our offer is successful, it provides to Aquila shareholders who accept the offer certainty, cash and a significant premium in an iron ore market, that has significantly declined since we made our offer," Zhihao said.
If the deal is accepted, Baosteel and Aurizon are keen to commence Aquila's major resource projects, including the $6.9bn West Pilbara iron ore project.
Baosteel already has a 20% stake in Aquila, representing a 50% stake ownership in the West Pilbara iron ore project.
Aurizon managing director and CEO Lance Hockridge said: "Aurizon and Baosteel are very committed to this offer and to the development of West Pilbara iron ore project and the significant economic benefits that the project would bring."
The offer from Baosteel and Aurizon is scheduled for closure on 11 July.