Global resources group BHP Billiton on Tuesday announced that it has made a $7,3-billion counter-bid for Australian mining group WMC Resources.
On November 22 last year, mining group Xstrata announced that it would bid to take over WMC Resources.
Xstrata is offering WMC Resources’ shareholders Aus$7 cash per share until March 24 2005, when its offer expires.
BHP Billiton is offering $7,85 per WMC Resources share.
The board of WMC Resources unanimously recommended that WMC Resources shareholders accept the BHP Billiton offer in the absence of a superior proposal, and has indicated that the directors will be accepting this offer for their own holdings of WMC Resources shares, BHP Billiton said in a statement.
“The acquisition of WMC Resources is a further step in BHP Billiton’s strategy of developing, operating and maximising the performance of large-scale, long-life, low-cost assets.
“It is an excellent opportunity to build on our existing nickel and copper businesses and bring uranium into our suite of energy products. Furthermore, the acquisition provides additional premium long-term options to satisfy continuing demand for growth in China and other high- growth economies,” BHP Billiton CEO Chip Goodyear said in a statement.
“BHP Billiton is best placed to maximise the value of WMC Resources’ assets. No other potential purchaser brings to this transaction the experience and synergy benefits of already having operations in both nickel and copper, and the track record of consistent on-time, on-budget major project delivery,” he added.
A successful acquisition of WMC Resources will see BHP Billiton have operating control of two of the world’s four largest copper deposits.
WMC Resources’ Olympic Dam assets is the world’s fourth-largest copper resource and one of the world’s 10 largest gold deposits.
The acquisition of WMC Resources will establish BHP Billiton as a major producer of uranium with the largest resource base in the world.
“Uranium is an important energy source in an increasingly energy-intensive world. Not only is this valuable on a standalone basis but it complements BHP Billiton’s existing energy portfolio of oil, gas and coal,” the group said.
BHP Billiton said it is best placed to maximise synergies in the nickel and copper businesses, marketing and other corporate functions.
The annual corporate cost efficiencies are estimated to total Aus$115-million, with a one-time cost of Aus$120-million.
“This offer supports the view of the value of WMC Resources that the board has consistently held. We will be working with BHP Billiton to ensure that this recommended offer is put to shareholders as soon as possible,” said WMC Resources CEO Andrew Michelmore.
The offer will be made through a subsidiary by way of an off-market takeover bid under the Australian Corporations Act 2001, and will be funded from both new and existing debt facilities.
BHP Billiton remains committed to an A credit rating and will retain financial flexibility following the acquisition.
After the acquisition, on a pro forma basis, BHP Billiton’s net debt, as at June 30 2005, is estimated to total $12,4-billion with corresponding net gearing of 42%.
The acquisition is expected to be earnings-accretive in the financial year ending June 30 2006.
The offer is subject to a number of conditions, including BHP Billiton receiving necessary regulatory approvals and acquiring at least 90% of the number of WMC Resources ordinary shares on issue.
BHP Billiton has exposure to 50,6-million WMC Resources shares, or 4,3% of the issued share capital, through cash-settled derivative contracts.
WMC Resources has entered into a deed of undertaking with BHP Billiton in relation to BHP Billiton’s offer.
This includes a break-fee of Aus$92-million payable to BHP Billiton in certain circumstances, including a successful competing takeover proposal.
WMC Resources will provide full details of the deed. — I-Net Bridge