ANOTHER twist emerged in the WMC Resources takeover saga last week with BHP Billiton announcing a cash offer of $7.85 per share for the miner, trumping Xstrata’s $7.20 bid. The BHPB bid values the company at $9.2 billion and includes a controversial break fee worth $92 million to BHPB should it be unsuccessful. WMC directors unanimously recommended the offer in the absence of a superior proposal. BHPB carried out the early part of its bid by employing Deutsche Bank to test the off-market value of the company. The bank managed to obtain 10.1 per cent of WMC in an ‘all or nothing’ purchase from international fund managers. The BHPB raid put to rest all notions of an Xstrata takeover as WMC shareholders awoke on Tuesday morning to learn that BHP was behind the latest acquisition for their company. The offer came as WMC went under the microscope of the Takeovers Panel over its target’s statement regarding the earlier Xstrata offer. The panel ruled that a comment in the statement was misleading and had to be corrected, boosting Xstrata’s hopes of contesting an independent valuation of WMC by experts Grant Samuel. Trading in WMC shares was halted on March 10 as the market digested the news. At the re-opening the next day the stock soared from its $7.46 close on March 11 to end the week at $7.94. However, market observers are not ready to close the books on the matter yet, with some expectations of a Rio Tinto, or Anglo American offer still on the cards. Analysts suggested this was the reason for the market premium over the BHPB bid. The BHPB move is not without its critics, with many holding the view that its chief executive Chip Goodyear has made an error in his attempt to acquire WMC at the top of the cycle. The detractors compare the move to when the company bought the Magma copper mine in America at the top of the market then watched the price of copper tumble. Others have been more supportive, however, giving WMC’s Olympic Dam operation a life-time significantly longer than the independent analysis undertaken on behalf of WMC, which valued the company at between $7.17 and $8.24 per share. For them, the company is worth closer to $10 per share. The BHP offer has also pleased both lobby groups and the WA State Government alike, as concerns surfaced over the possibility of Xstrata’s metal trading arm, Glencore, trading Olympic Dam uranium. Not to mention the WA Government’s dissatisfaction with Xstrata’s conduct at the Windimurra vanadium mine, which the Swiss miner sought to dismantle in the light of depressed prices and after taxpayers had sunk $30 million into shared infrastructure. Although the government might not be so happy about the loss of Xstrata’s plan to run WMC’s nickel operations from Perth, something BHPB has not committed to.
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