Takeover target Perilya has urged shareholders to vote in favour of a $45 million major acquisition by a Chinese company, in what has been described as "not fair but reasonable" by an independent expert.
The Perth-based company will issue 197.6 million shares at 23 cents apiece to Shenzhen Zhongjin Lingnan Nonfemet, for a cash consideration of $45.5 million.
Should Perilya shareholders approve the placement and necessary Australian regulatory approvals are obtained, Zhongjin will emerge with a 50.1 per cent stake in Perilya.
Chinese authorities approved the proposed placement last month.
Shares in Perilya closed up one cent to 19c in trade today.
Perilya managing director Paul Arndt said the $45.5 million cash injection will strengthen the company's financial position during the current economic uncertainty.
"We are confident the proposed share placement to Zhongjin Lingnan will help Perilya to manage through the current period of adverse metal prices," Mr Arndt said.
"Zhongjin Lingnan is China's third largest zinc producer, and will be a strategic long-term partner, bringing a wealth of mining, processing, smelting and marketing experience to Perilya."
An independent expert report compiled by Ernst & Young has recommended Zhongjin's offer over CBH Resources takeover bid, which is due to expire in March.
However, the report said while the placement represents a premium to Perilya shares, it is "below the low end of Ernst & Young's assessed fair market value range of between $0.33 and $0.38 per Perilya shares".
"... with the volatility in capital markets expected to continue through 2009, the issue of the shares to Zhongjin Lingnan will provide Perilya with a significant level of funding without the need to dispose of assets or secure new funding from alternative sources," Ernst & Young said.
Directors in Perilya said they will vote in favour of the placement at the meeting to be held on February 5.
Zhongjin has previously said it intends to reject CBH's takeover bid.
