01/08/2016 - 11:46

Iluka confirms $375m takeover

01/08/2016 - 11:46


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Iluka Resources has confirmed plans to wholly acquire Africa-focused miner Sierra Rutile in an all-cash deal valued at about $375 million.

Iluka confirms $375m takeover
Iluka chairman Greg Martin.

Iluka Resources has confirmed plans to wholly acquire Africa-focused miner Sierra Rutile in an all-cash deal valued at about $375 million.

Iluka flagged the deal on Friday when it entered a trading halt, after suspecting that confidentiality of discussions between the two parties had been breached.

The mineral sands miner is offering 36 pence in cash for each Sierra share, representing a 34.7 per cent premium to the London-listed target’s three-month volume weighted average price.

The deal values Sierra at about £215 million ($A375 million).

Outgoing Iluka managing director David Robb said Sierra was a long-life operation, with an established position in high-grade chloride feedstock markets.

“The combination provides Iluka with additional, long life (20 years plus) resources of proven quality, with further potential through resource additions, reserve optimisation and exploration,” he said.

“The combination enhances Iluka's rutile portfolio position. This enhancement sits alongside Iluka’s existing position as the largest global zircon producer.

"Due diligence has been conducted on the Sierra operation and Iluka believes the offer represents an attractive risk/return profile for shareholders across a range of scenarios.

“The transaction is expected to be EPS accretive in the first full year (2017).”

Iluka chairman Greg Martin said the cash offer also entailed absorbing Sierra’s debt of $US60 million.

The acquisition of Sierra along with current Iluka project progress provides the potential for enhanced portfolio flexibility, which will in turn determine the level and phasing of Iluka’s future capital expenditure,” he said.

“Iluka will continue to prioritise the maintenance of a strong balance sheet after an expected peak debt in 2018 as internal projects are also funded within that period.”

Sierra chief executive John Sisay said the acquisition would ensure the company’s operations in Sierra Leone would be realised to their fullest potential.

“I am proud of the important milestones which have been achieved by management and employees in recent years, in particular, record rutile production in 2015 and H1 2016 and the successful commissioning of the Gangama dry mine in May 2016,” he said.

“Iluka is a financially strong and established owner with a successful track record in the mineral sands sector who will continue the development of Sierra’s long-life assets.

“Management and employees will benefit from Iluka’s future investment in Sierra and wider career development opportunities across Iluka’s global asset base.

“This acquisition demonstrates that Sierra Leone is open for business and able to attract investment from high profile multinational companies such as Iluka that are keen to participate in the development and growth of the country."

Sierra chairman Robert Edwards said the deal would allow the company’s shareholders to realise value today in cash for their shares at an acceptable level after management achieved all of its immediate goals with respect to optimising the asset base.

“Iluka has an established track record in the mineral sands sector and will be able to support Sierra’s longer term growth and optimisation ambitions,” he said.

“We believe that the acquisition provides attractive certainty and liquidity for Sierra and its shareholders as a whole."

Ashurst and Conyers Dill & Pearman acted as legal advisers to Iluka.

Iluka shares were 3.1 per cent higher to $7.24 each at 11:45am.


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