Indophil Resources calls suitor 'opportunistic'
17-MAY-2008 Intellasia | Forbes
May 17, 2008 - 7:00:00 AM
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The world's fourth-largest copper producer, Xstrata, offered on Thursday to take over the Australian-listed copper mining firm Indophil Resources for 426.0 million Australian dollars (US$397.0 million). Indophil Resources immediately rejected the "unrealistically opportunistic" bid, compelling Xstrata to write a bigger check if it wants to see the acquisition through.
Xstrata (other-otc: XSRAF -news -people ) said Thursday it would offer 1 Australian dollar (93 cents) per share to acquire Indophil Resources, its partner in the Philippines' Tampakan copper and gold mine project. The bid represented a 28% premium to the target firm's Wednesday closing price of 78.0 Australian cents (72.7 cents).
Xstrata is focused on Indophil Resources' interest in Tampakan, the Philippines' largest mining project, located in South Cotabato province on the island of Mindanao. The US$2 billion mine is currently 62.5% owned by Xstrata and 34.2% held by Indophil Resources, while the latter has conducted negotiations to secure the remaining 3.3%.
To realise its ambition to gain full control over its major asset in the Philippines, Xstrata added that it had clinched a prebid acceptance arrangement to assume the 17.8% stake in Indophil Resources held by Lion Selection (other-otc: LNSLF -news -people ), a diversified mining company listed in Australia and the largest shareholder in Indophil. This would take Xstrata's own stake in Indophil Resources to 19.99%.
Xstrata's offer, however, is conditional on Indophil Resources withdrawing its own takeover bid for Lion Selection or else on the bid failing. Indophil Resources launched an all-share bid for Lion Selection in March, valuing the target at 340.0 million Australian dollars (US$316.8 million).
Shares of Indophil Resources rocketed 31.8%, to 1.08 Australian dollars (US$1.01), in early Thursday afternoon trading in Sydney, as investors were optimistic that Xstrata might raise its bid after the swift rejection of its approach.
"The Indophil board considers that the Xstrata approach is unrealistically opportunistic and is at a price that does not reflect the value of Indophil," the company stated. Indophil Resources knows that its true net worth exceeds Xstrata's offer. Simply by calculating its stakeholding in the US$2 billion Tampakan copper and gold mine, its asset value is US$680 million, about 70% higher than Xstrata's present bid.
"The approach from Xstrata is clear evidence that Xstrata Copper, as the manager and 62.5% interest holder in the Tampakan Project, appreciates the huge value that Indophil's shareholders stand to realise from Indophil's participation in the development of the Tampakan Project," the company's statement stressed.
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