Chinese iron and steel giant Baosteel on Monday said it was readying a takeover bid for Aquila Resources that values the Australian iron ore and coal miner at Aus$1.4 billion (US$1.3 billion). Baosteel Resources Australia, a subsidiary of the Chinese parent's overseas development arm, and Australian rail freight operator Aurizon offered Aus$3.40 per share in cash for the company. The conditional off-market proposal represents a premium of 38.8 percent to Aquila's close on Friday of Aus$2.45. Shares in the firm surged 37 percent to A$3.36 on the news. Baosteel Resources International chairman Zhihao Dai said as the bidders had been unable to meet the Aquila board, they had decided to take the offer directly to shareholders. "We believe this is a compelling offer for Aquila shareholders as it provides an opportunity for them to realise certain value for their Aquila shares at a significant premium to current market prices... at a time of uncertainty of the funding and development pathway for Aquila's suite of greenfield projects," he said in a statement. He said the deal was in line with Baosteel's strategy of building a leading global steel and resources business by developing Aquila's Pilbara iron ore project in Western Australia and a hard coking coal development in Eagle Downs in Queensland. Baosteel already has a near 20 percent stake in Perth-based Aquila. "This cooperation represents a co-investment by Australia's largest rail freight operator and one of China's leading iron and steel producers to develop quality Australian resources," Aurizon Holdings chief executive Lance Hockridge said. The takeover had the potential to develop a new world-class iron ore district in the western Pilbara, supported by an integrated multi-user rail and port solution, he added.