Sundance Resources' $1.37 billion takeover by Hanlong Mining was last night on the brink of collapse amid reports the suitor's billionaire owner, Liu Han, had been arrested by Chinese police.
The reason for Mr Liu's arrest remains unclear although sources close to Sundance say they believe reports out of China that the Hanlong owner and his wife had been detained.
Sundance chairman George Jones and senior Hanlong officials, including Hanlong's advisers Merrill Lynch, are due to meet today to discuss progress with the takeover plan, although Mr Liu's arrest is likely to dominate the talks.
Sundance's shares have already been suspended from trade, at 21ï¿½, following the latest round of market speculation this week that Hanlong was struggling to secure a credit-approved terms sheet from its financiers, including China Development Bank, for the 45Â¢ a share cash takeover bid.
A tough iron ore environment coupled with Hanlong's funding difficulties had already presented a major challenge for Mr Liu to meet next Tuesday's deadline to present the term sheet to Sundance.
His arrest yesterday is likely to further complicate matters given that Hanlong relies on credit support from Chinese authorities.
News of Mr Liu's arrest was yesterday reported by Shanghai Securities News, citing unnamed sources. The news service said it remained unclear why Mr Liu and his wife had been detained. However, it pointed to moves by Mr Liu to weaken his ties to China's government. It said Mr Liu held a Hong Kong passport but not a Chinese one.
The term sheet deadline is one of several conditions of the takeover agreement between the two sides. Failure to present the term sheet would enable Sundance to terminate the deal and allow it to begin talks with other Chinese parties, most likely state-owned operators.
Sundance would not discuss Mr Liu's arrest other than to tell the Australian Securities Exchange it was "seeking information from Hanlong".
A Sundance source said last night: "No one knows why he's been detained."Mr Liu's arrest could have ramifications for another Perth metals group, Moly Mines, valued at $48 million, which counts Hanlong as its controlling shareholder. Moly told the ASX yesterday it was "seeking clarification from Hanlong as to whether this event has any consequences for the company and Mr Liu's position as a director".
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