Wmc Goes Into Battle Mode
Sydney Morning Herald
Friday December 3, 2004
WMC Resources is getting serious about defending Xstrata's $7.4 billion hostile takeover bid, urgently setting up a data room on the internet and preparing for a beauty parade at its large Olympic Dam copper-uranium mine in South Australia.
It is understood at least three parties interested in Olympic Dam will visit the remote site in coming weeks, though whether this will result in a rival proposal to Xstrata's $6.35 a share bid remains to be seen.WMC has been the subject of widespread speculation that the likes of Rio Tinto or Chinese interests want to get their hands on Olympic Dam's large copper and uranium reserves.WMC's advisers - investment banks UBS, Citigroup and law firm Allens Arthur Robinson - are also believed to be busily setting up a "virtual data room" to provide potential suitors with information about Olympic Dam as shares in the Melbourne mining outfit show signs of running out of puff.The stock has been riding high on speculation a higher bid will eventuate, hitting $7.39 earlier this month, but yesterday closed 6c lower at $7.14 as the strong Australian dollar erodes the market's bullishness. Every US1c increase in the Australian dollar against the greenback reduces WMC net earnings by $26 million, leading Macquarie Research Equities analyst Ben Lyons to cut his earnings forecasts by 18 per cent to $729 million.Mr Lyons, who is tipping the Australian dollar to close in on US79c next year, said the exchange rate improved Xstrata's offer."The $6.35 per share offer from Xstrata appears even more attractive, pitched at a 44 per cent premium to our revised WMR net present valuation [$4.40]," he said in a note to clients.Nevertheless, the market is still betting a rival bid will emerge once the WMC board, which has described Xstrata's offer as "materially inadequate", releases its target's statement around Christmas, with Rio Tinto considered the likely candidate.Rio is said to have employed Macquarie Bank, engineering consultancy Sinclair Knight Merz, and lawyers Allens Arthur Robinson to work out if it can justify a higher bid but is not commenting on what it describes as market speculation.WMC, which is pursuing a "consider all options" defence, will soon allow potential suitors or joint venture partners to log on to a secure website to run through Olympic Dam's numbers.WMC boss Andrew Michelmore has said the company has been approached by interested parties in the past and is prepared to consider all options to defend itself against Xstrata.Mr Michelmore has said the Xstrata bid does not reflect the worth of Olympic Dam, a mine it hopes to expand at a cost of $4 billion.Xstrata argues no feasibility studies have been completed on the proposed expansion and overall capital expenditure could be significantly higher than $4 billion.
© 2004 Sydney Morning Herald