We can't believe it either !copied from Business SpectatorBHP...

We can't believe it either !

copied from Business Spectator

BHP Billiton Ltd has made a conditional offer to buy all of the issued shares in Western Australia-based United Minerals Corporation NL (UMC) for $204 million.

The offer, from BHP's wholly-owned subsidiary BHP Billiton Minerals Pty Ltd, is priced at $1.30 cash for each UMC share, representing a 43 per cent premium to UMC's closing price on Tuesday October 6, after which its shares entered a trading halt.

The deal is conditional on UMC dropping a rival offer from China Railway Materials Commercial Corp Group (CRM), under which UMC proposed to sell an 11.4 per cent stake of the company to the Chinese group.

Shares in United Minerals soared 39.56 per cent to close at $1.27, while BHP shares were 0.77 per cent stronger at $39.20 against a 0.48 per cent fall in the benchmark index.

UMC, which owns an iron ore deposit in the Pilbara region of Western Australia, said it had entered a merger implementation agreement with BHP, under which the Perth-based miner would propose a scheme of arrangement between itself and its shareholders for the acquisition of all its shares.

UMC's directors have unanimously recommended the offer, which BHP said was final in the absence of a competing proposal.

"By any measurement this is a great result and it offers all of our shareholders an opportunity to deal away the significant development risks which we would need to overcome to bring the deposit into production," UMC chairman Alan Birchmore said in a statement to the Australian Securities Exchange (ASX).

The new agreement follows confidential talks between the two parties earlier this year, which were ultimately unsuccessful, canvassing a potential corporate transaction and a technical due diligence review of UMC's ore deposit.

In September, CRM approached UMC to buy an 11.4 per cent stake in the company, which was due to be finalised with regulatory approvals on December 7.

The deal, described by UMC at the time as "groundbreaking" and a "significant milestone" for the company, also included a 10-year, 3 million tonnes per annum iron ore sales contract with CRM.

The BHP offer is subject to UMC agreeing not to issue options under a prospectus dated September 10, and the cancellation of the CRM placement and sales contract.

Bell Potter Securities client adviser Chris Kimber said he was surprised UMC directors had agreed to BHP Billiton's offer after already agreeing to a deal with CRM.

"I can't believe that they would just do anything like that after it was agreed (with CRM). It just doesn't make much sense," Mr Kimber said.

Meanwhile, a statement from ASX-listed mining investment company RIMCapital Ltd, which has a joint venture relationship with CRM, said it was reviewing BHP's offer.

RIMCapital said it was entitled to fees from a proposed $27.2 million payment to UMC as a result of its partnership with CRM, adding that it would keep the market informed as the situation developed.