By David Fickling
Of DOW JONES NEWSWIRES
SYDNEY (Dow Jones)--Wah Nam International Holdings Ltd. (0159.HK), a Hong Kong-based
investment company, will offer A$930.6 million in a stock-based bid for Australian iron
ore miners Brockman Resources Ltd. (BRM.AU) and FerrAus Ltd. (FRS.AU), in deals which
value the companies at A$1.20 billion, the companies said Thursday.
The news sent both Australian miners' shares sharply higher. At 0045 GMT, Brockman
Resources was trading up 17% at A$5.55, while FerrAus shares were up 23% at A$1.055.
The deal is the third play for an Australian iron ore miner by a Chinese company in
recent weeks. China, which accounts for around two-thirds of demand for seaborne iron
ore, is keen to reduce its dependence on Vale S.A. (VALE), Rio Tinto Plc (RIO), and BHP
Billiton Ltd. (BHP), which account for roughly the same proportion of supply.
On Thursday, Xstrata Plc (XTA.LN) announced that it had reached 51.12% acceptance for
its A$513.6 million takeover offer for Mauritania-focused iron ore miner Sphere Minerals
Ltd. (SPH.AU), seeing off a rival proposal from a consortium of Chinese steelmakers led
by Singapore-based commodities trader Sin-Tang Development.
The chairman of Mount Gibson Iron Ltd. (MGX.AU), Australia's fourth-largest iron
ore miner, also said Tuesday he would resign in a long-simmering dispute over board
independence with Hong Kong-based non-executive directors also connected to mainland
Chinese steelmakers.
In separate statements Thursday, Brockman and FerrAus said Wah Nam would offer 30 of
its own shares for each Brockman share and six of its shares for each FerrAus share.
FerrAus said the deal would value the company at A$1.30 per share, based on Wah
Nam's last close of HK$1.69/share, giving the company a value of A$267.4 million.
Brockman would be valued at A$6.50 a share by the same measure or A$929.6 million, a
37% premium to its previous close. Wah Nam already owns 18.9% of FerrAus and 22.6% of
Brockman.
The deal would involve Wah Nam purchasing shares valued at A$930.6 million with its own
stock, although the company's own market capitalisation of HK$6.603 billion is only
worth around A$850 million in local currency.
One analyst, who did not want to be named as he no longer covered the companies, said
he thought further funding would likely be forthcoming from any mainland Chinese groups
that chose to back Wah Nam.
"I don't think size has ever frightened the Chinese," he said.
Hong Kong-based Wah Nam's major assets are a copper mine in mainland China, a Hong
Kong-and-mainland Chinese-based limousine company and its stakes in Brockman and FerrAus.
According to the company's 2009 annual report, it is controlled by Leading Highway
Ltd., a company registered in the British Virgin Islands and wholly owned by Hong Kong
toy manufacturer and investor Cheng Yung Pun.
In statements to the Australian Securities Exchange, Brockman and FerrAus said that
shareholders should take no action on the offer until a bidder's statement had been
received.
Both companies are part of the North West Iron Ore Alliance, a grouping of junior iron
ore miners in Australia's Pilbara region which also includes Atlas Iron Ltd.
(AGO.AU), Australia's fifth-largest iron ore producer.
Brockman hopes to produce 17 million metric tons a year of iron ore from its Marillana
Iron Ore Project, while FerrAus hopes to produce 15 million tons a year from its deposits
in the eastern Pilbara.
The Pilbara accounts for all but a handful of Australia's iron ore exports.
The companies were not immediately available for comment.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; [email protected]
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