China's biggest aluminum producer, Aluminum Corp of China Ltd (Chalco), has dropped its proposed $926 million takeover bid for Mongolia-focused Turquoise Hill's (formerly known as Ivanhoe Mines) stake in SouthGobi Resources after the Mongolian government voiced strong opposition to the transaction.
Although the proposed deal had the backing of SouthGobi's majority shareholder, Turquoise Hill had last month said that it may not get the approval of the Mongolian government that has become vary of increased Chinese investments in the country's natural resources.
Turquoise Hill, which owns a 58-per cent stake in SouthGobi, said in a statement today that there was "minimal prospect of obtaining the necessary regulatory approvals within an acceptable timeframe".
''Turquoise Hill announced the termination of the lock-up agreement entered into with Aluminum Corporation of China Limited ("Chalco") on April 1, 2012 pursuant to which Turquoise Hill agreed to tender its shares in SouthGobi Resources Ltd. into a proportional takeover offer to be made by Chalco for up to 60 per cent, but not less than 56 per cent, of the shares in SouthGobi,'' the company said in the statement.
''After careful consideration, both Turquoise Hill and Chalco have concluded that the proposed transaction has minimal prospect of obtaining the necessary regulatory approvals within an acceptable timeframe. As a result, Turquoise Hill and Chalco have agreed to terminate the lock-up agreement, including Chalco's obligation to make a proportional offer.''
In April, Chinese state-owned Chalco had offered to buy Mongolia-focused Turquoise Hill stake in SouthGobi Resources for C$925 million ($926 million), in order to diversify into other commodities like coal. (See: Chalco to buy Ivanhoe Mines' stake in SouthGobi Resources for $926 mn).