china's $2.2bn play for extract resources

China's $2.2bn play for Extract Resources

by: Matt Chambers
From: The Australian
October 10, 2011 12:00AM

CHINA'S Guangdong Nuclear Power is set to launch a takeover bid for London-listed Kalahari Minerals, in a move expected to result in a $2.2 billion offer for Perth-based uranium company Extract Resources.

If the bid plays out as expected, it would be the biggest Australian mining takeover since Peabody Energy and Arcelor Mittal launched a $5bn bid for Macarthur Coal in July.

State-backed Guangdong has reopened talks with Kalahari on a deal that fell apart after the Fukushima earthquake and nuclear disaster, according to a report in London's Sunday Times.

A pound stg. 675 million ($1.07bn) takeover deal for Kalahari could be concluded as early as this week.

Kalahari is Extract's biggest shareholder, at 42.7 per cent, and Guangdong's key target in its bid is Extract's planned Husab uranium project in Namibia.

Under Australian takeover laws, if Guangdong acquires Kalahari, it will have to bid for Extract because it will acquire more than 20 per cent of the Australian company.

Because Guangdong is going after Extract's main asset, the Australian Securities & Investments Commission is unlikely to exempt Guangdong from extending the takeover to Extract.

Thrown into the mix is Rio Tinto, which owns 11 per cent of Kalahari, 14 per cent of Extract and the Rossing uranium mine in Namibia, which is next to Husab.

Guangdong is said to be offering 270p a share for Kalahari, an 11 per cent premium to the 240p price the target last closed at on London's Alternative Investment Market. Guangdong offered 290p a share for Kalahari in March, valuing the target at pound stg. 725m.

But it tried to slash its price to 270p a share after the Fukushima disaster sent uranium markets plummeting.

Talks broke down after Britain's Takeover Panel refused to let Guangdong reduce the offer and instead put in place a three-month cooling-off period, which has now expired.

During the previous bid, Guangdong said it would apply to ASIC for an exemption from having to make a bid for Extract.

Extract, in turn, asked ASIC to ensure that all its shareholders received equal benefit from Guangdong's bid for Kalahari.

Yesterday, Extract declined to comment on the possible Guangdong bid.

The equivalent value of a full bid for Extract, including Kalahari's stake, would be $2.2bn.

Rio, having started talks with Extract on developing Husab in February, was quiet about its intentions during the previous offer and after it was rejected.

Extract says it remains in talks with a number of parties about the mine, but nothing concrete has been worked out in the past eight months.

Husab is one of the largest uranium deposits in the world and is expected to be a key supplier to China's nuclear power stations.

The Chinese are being advised by Deutsche Bank. Kalahari has hired Ambrian Partners.

The takeover would be the latest instance of Beijing's increasingly aggressive pursuit of natural resources.

China's Minmetals last month launched a $1.3bn offer for Anvil Mining, a copper producer with assets in the Democratic Republic of Congo.

http://www.bloomberg.com/news/2011-10-09/china-guangdong-plans-bid-for-u-k-s-kalahari-sunday-times-says.html