Chinese group ups its stake in Sphere to halt Xstrata Michael Bennet From: The Australian October 23, 2010 12:00AM
A CHINA-BACKED group is ready to launch a counter-proposal for takeover target Sphere Minerals.
The move comes after the group upped its stake in the iron ore miner, to effectively block Xstrata's $428 million offer.
In a notice to the Australian Securities Exchange yesterday, Singapore-based Sin-Tang advised it had upped its stake to 10.77 per cent from the 8.48 per cent it acquired late last month.
The move puts increased pressure on Xstrata to up its $2.50 cash offer or drop its 90 per cent acceptance condition after repeatedly being forced to extend its offer due to a poor uptake rate.
Deutsche Bank-advised Xstrata has moved to just 8.35 per cent of Sphere, of which the majority has been committed by Sphere's directors.
It is understood Sin-Tang is not interested in Xstrata's $2.50 offer, which was on Thursday again extended until November 12, and remains keen on the future benefits from Sphere's Askaf iron ore project in Mauritania.
As first revealed on The Australian website yesterday, Sin-Tang is believed to be about to put a counterproposal to Sphere as early as this week involving financing for the project in exchange for equity.
A full rival takeover is unlikely, sources said. But Sphere, which has recommended Xstrata's offer, is bound by "no shop, no talk" clauses and could face a $4.4m break fee should it abandon Xstrata.
Askaf is located 35km south of Sphere's 50 per cent-owned Guelb el Aouj project and is targeting first production in early 2012, but requires about $540m to develop. Its potential has seen brokers value Sphere at $4.
A source close to Xstrata said its offer remained the only one on the table and that Sphere's share price would likely fall back to the $1.50 level prior to its bid.
Sphere shareholders who have accepted can withdraw their acceptances because Xstrata has extended its offer by more than one month.
Sphere shares yesterday closed 2c lower at $2.51.
Sin-Tang is understood to have acquired the extra shares from two institutions on Thursday.
