From the Globe and Mail
LionOre bidding expected to peak at $28
Andrew Willis, today at 1:58 PM EDT
Post the first comment Back to the blog
The big break fee LionOre Mining International promised a suitor is not expected to shut down the bidding war for the nickel play.
LionOre pledged to pay Xstrata a $305-million fee this week, worth 4.9-per-cent of the value of the Swiss company’s bid, in order to draw a $25-a-share bid out of the Swiss company. That beat a $21.50 offer last month from Norilsk, the world’s largest nickel miner.
Russia's Norilsk is now expected to return fire with a $28-a-share offer, and that counter-bid should come within a week to beat the May 25 deadline set by Xstrata, according to a report from Scotia Capital mining analyst Onno Rutten. He also sees Xstrata matching that bid to win this battle. At prices north of $28, or $6.1-billon, the analyst says a LionOre acquisition does not make economic sense.
When it comes to the break fee, which is well above the traditional 3-per-cent level, Mr. Rutten wrote that LionOre’s pledge creates an “undesirable precedent from a shareholder perspective.” But on this particular contest, he concluded: “The break fee does not substantially alter the bidding dynamic between two highly-motivated and well-funded bidders.”
For those who play the odds, Scotia Capital sees a 66-per-cent chance of a Norilsk bumping to $28, and a 33-per-cent chance that the Russians walk away, leaving Xstrata with the winning bid at $25.
LionOre stock is changing hands today at $27.51 on the Toronto Stock Exchange.
LIM
lionore mining international limited.
