MELBOURNE (Reuters) - South African diamond giant De Beers launched a A$522 million hostile takeover offer for Ashton Mining Ltd on Monday in a bid to expand into Australia.
The Ashton bid follows a C$259 million hostile bid by De Beers last month for Canadian miner Winspear Diamonds Inc, in line with its new strategy to market its own gems and run more foreign mines.
A successful bid would give De Beers a 40.1 percent stake in the Argyle diamond mine, Australia's largest, and reflects a new focus on foreign acquisitions as part of an overhaul of the world diamond king.
Ashton said the A$1.62 a share offer, pitched 20 percent above its closing price on Friday and 42 percent above its average price in the past 30 days, was too low and urged shareholders not to sell.
``Ashton believes the offer is opportunistic,'' said the miner.
However, De Beers said the offer provided full and fair value and few investors were willing to punt on a higher bid.
Ashton shares hit a high of A$1.64 before settling up 25 cents at A$1.60 in early afternoon trade, two cents below the offer price.
Ashton's shares were languishing below 70 cents a year ago and have risen from about A$1 to Friday's A$1.35 in recent weeks on takeover talk and a company forecast that first half profit would exceed last year's full year profit by 10-20 percent.
Ashton reported a 1999 profit after tax and before abnormals of A$17.5 million.
NEW ERA FOR DE BEERS
De Beers, which sells over 60 percent of the world's uncut diamonds, has said it plans to focus on boosting global demand, rather than rely on constraints to maintain prices by soaking up diamonds from rival producers.
Ashton's key asset and earner is its stake in the Argyle mine in Western Australia state, which is 59.9 percent owned by Rio Tinto Ltd/Plc and produced 29.7 million carats in 1999.
The mine had been expected to close within 10 years but Ashton said recently it was possible the mine life could be extended until at least 2018.
It supplies diamonds used for the rapidly growing market of affordable jewelry sold in department stores. In the first half of the year the price for Argyle diamonds rose by more than 10 percent.
David Walker, director of resources research house Auzeq Securities, said the market had not yet fully priced in the earnings turnaround that was coming through for Ashton.
``However A$1.62 is a high price. It's clearly going to tempt some but the question remains for Ashton shareholders whether that is a full price being paid for the commercial and marketing aspects that De Beers stands to gain from the bid,'' Walker said.
Ashton also owns the Merlin mine in the Northern Territory, a stake in the Cuango diamond mine in Angola, a 35 percent stake in Australian gold miner Aurora Gold Ltd .
Malaysia Mining Corp Bhd, which owned about 49.9 percent of Ashton, has already agreed to sell a 19.9 percent stake to De Beers.
``Malaysian Mining said they will sell the balance to the highest offer,'' said Ashton general manager corporate Glenister Lamont.
Lamont said the company expected other diamond miners to look carefully at a possible counterbid to get their hands on Argyle.
The Ashton bid comes on the heels of Rio Tinto Plc's A$2.8 billion hostile takeover offer for Australia's North Ltd, since topped by a A$3.1 billion offer from London-listed Anglo American Plc .
Anglo American Plc has a 32.2 percent interest in De Beers. Ashton has appointed CIBC as advisers.
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