Looks like the money will soon be in the bank! A good result as a few days back it looked like getting to 50% would be a struggle...
Exxaro Wins Control Of African Iron
Exxaro Resources’s ambition to become a bigger producer of iron ore is a step closer to reality, with the South African company poised to declare victory in its A$338 million pursuit of Congo-focused miner African Iron.
Investors holding around two-thirds of African Iron’s stock pledged their support for Exxaro’s offer of A$0.51/share ahead of a key deadline for acceptances late Tuesday, a person familiar with the matter told Deal Journal Australia.
The deal’s interesting structure, with the offer price set to rise to A$0.57/share if Exxaro secures a 75% interest, appears to have made a key role in its success by ensuring arbitrage funds flooded on to the register after it was first announced to the market on Jan. 11.
Those funds joined Cape Lambert Resources, chaired by mining entrepreneur Tony Sage, and African Iron directors in tendering their shares–support that effectively neutralized any risk of the deal failing if 19.9% shareholder Equatorial Resources held out.
Exxaro is likely to declare its offer unconditional Wednesday, a move that will turn up the heat on Equatorial to accept the bid over the next fortnight.
While Equatorial may opt to retain its shares, such a move carries risks as it would need to fund its share of capital expenditure on rail and port infrastructure to ensure ore from African Iron’s Mayoko project can be exported from the Republic of Congo.
African Iron, which is based in Western Australia, planned to build the Mayoko mine with an initial output of 5 million tons of ore. Its acquisition puts Exxaro on course to reach its stated strategy of producing 10 million tons of iron ore annually by 2016, complementing its existing strength in coal production in South Africa and mineral sands mining.
Expanding overseas also helps Exxaro to offset constraints on growth within South Africa that include infratsructure bottlenecks, regulatory uncertainty, bureaucratic delays and high labor costs.
Exxaro was advised by Hugh Thomas, a Sydney-based managing director at Investec, and Neil Pathak, a Melbourne-based specialist in M&A at Gilbert + Tobin. African Iron recieved legal advice from a team at Freehills led by David Gray.
