Does this portend a battle for RNG?
PERCENT BID INCREASE
Nickel battle second phase. Xstrata ups bid for LionOre
The next phase in the battle for LionOre has commenced with a big increase in its offer from Xstrata.
Author: Lawrence Williams
Posted: Tuesday , 15 May 2007
LONDON -
LionOre (TSX: LIM)(ASX: LIM)(LSE: LOR)(BSE: LIONORE) shareholders who had been hoping for a bid battle for their stock will be happy today on the announcement that diversified miner Xstrata plc (LSE: XTA)(ZSE: XTA.S) has sharply raised its bid for the company, topping Norilsk Nickel's bid by over 16 percent - and its own earlier agreed bid by a massive 35.1 percent. Meanwhile LionOre itself has just reported a huge jump in first quarter earnings, despite ‘losses' from forward sales of part of its nickel output.
Under the terms of the new offer, Xstrata has increased the consideration payable from its original bid, which was subsequently exceeded by the Norilsk offer, of C$18.50 to C$25.00 in cash per LionOre share. The expiry time for the increased Xstrata Offer is midnight (Vancouver time) Friday 25 May 2007.
Analysts had probably been expecting an increased offer as it was felt that Xstrata needed LionOre more than Norilsk - but it now remains to be seen whether the latter will now respond with an increased offer of its own. Sky high nickel and other metal prices have meant that both Xstrata and Norilsk have been making big earnings increases that can help them support their bids and raise the necessary cash.
The increased Xstrata Offer values the total share capital of LionOre at approximately C$6.2 billion (US$5.6 billion) and provides C$872 million more cash to the LionOre shareholders than the Norilsk offer. Xstrata expects to mail a formal notice of variation over its original agreement to all LionOre shareholders today.
The Board of Directors of LionOre, after consultation with its financial and legal advisors, has unanimously approved entering into the amending agreement with Xstrata and has recommended it to its shareholders. The Board has also determined that the Norilsk offer is no longer a superior proposal for purposes of the support agreement between Xstrata and LionOre and accordingly recommends that LionOre shareholders reject the Norilsk offer.
Xstrata says that it has been notified that all of the LionOre shareholders, including certain directors and officers of LionOre, that entered into lock-up agreements with Xstrata have deposited or instructed that their LionOre shares to be deposited to the offer, representing approximately 19.5% of the outstanding LionOre shares.
Xstrata received notice yesterday from the Canadian Minister of Industry that Xstrata's acquisition of LionOre has been approved under the Investment Canada Act. Xstrata has also received all necessary approvals from European Union member states for its acquisition of LionOre. Xstrata's Offer is now free to proceed with no further regulatory review in the EU, any EU member state, Australia or Canada.
LionOre meanwhile, has reported first quarter net earnings of US$148.3 million - up from $13.2 million a year ago - and this figure was achieved after a ‘book loss' of $87.5 million related to the market value of the Company's nickel forward sales contracts. LionOre also reported cash in hand of $643.4 million - a figure company President and CEO, Colin Steyn, called ‘unprecedented'.
With respect to the battle for LionOre, though, it now remains to be seen whether Norilsk will up its own offer. The Russian company, the world's No.1 nickel miner, is certainly not short of cash. Xstrata CEO, Mick Davis, though will be hoping he's pitched his new bid high enough to ward off any raise from Norilsk, and that LionOre will follow Falconbridge into the Xstrata menagerie.
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