for the unwashed, WMC is a nickel company
ÿ-ÿ ÿBUSINESSÿ
Wave of mergers expected
By BARRY FitzGERALD
The Rio Tinto assault on North has focused attention on the potential for an acceleration of industry rationalisation covering companies worth $15 billion.
Investors turned their attention to likely "situation" stocks in the belief that the Rio move could kick off a wave of mergers and takeovers in the sector.
That wave has already washed over the world's other key mining markets of North America and South Africa but has yet to arrive here in a big way.
The consolidation amongst the overseas players is being driven by the need for the industry to remain relevant to investors, both in terms of scale and performance.
The absence here of the big ticket mergers and acquisitions that have characterised markets elsewhere is despite the local sector being ripe for the picking. The balance sheet problems of the 1990s have been solved, share registers remain open and capacity additions to world-scale operations have been bedded down.
The local industry has been reluctant to kick-start its own consolidation, leaving it to Anglogold to take over Acacia Resources and Rio Tinto to buy out the minorities of Comalco for $1.6 billion.
The local reluctance to make the first move reflects the desire to first pass on to shareholders the benefits of the industry's robust health, with profits in all but the gold sector to at least double this year. But that same reluctance to make its own consolidation move has exposed the sector to the more fleet of foot moves by its overseas counterparts, including Rio with its Comalco and North moves.
Investors yesterday pushed share prices higher in those stocks now considered to be vulnerable to a takeover, be it from an overseas group or a local.
WMC was 2.9 per cent higher at $7.26, Newcrest rose 3 per cent to $4.09, Pasminco gained 2.4 per cent to 85 cents, Iluka rose 3.9 per cent to $4.52, MIM was 2.3 per cent higher at 88c and Normandy joined in with a 2.3 per cent gain to 86c.
WMC, with its $8.3 billion market capitalisation, is by far the biggest of that $15 billion portfolio of companies now considered to be at risk. Somewhat ironically, it was WMC that many analysts thought would move on North, with the Robe River iron-ore operation in the Pilbara the main attraction.
There was speculation that if Rio was trumped in the North bid, it might well be by WMC. But central to that assumption is that WMC and North merge on a friendly basis. Like North itself, WMC has long been the subject of takeover talk because of its open share register and its appeal as a break-up situation.
Among the other stocks to post gains yesterday, it was Pasminco that had the most fans.
The company offers a buyer a one-hit opportunity to become the world's biggest zinc producer.
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