FerrAus, Brockman Resources mull merger to fend off Wah Nam International takeover bid Nick Evans, PerthNow January 24, 2011 1:07PM
A MERGER between Brockman Resources and FerrAus is a possibility, if the two companies see off the Wah Nam International takeover bid.
Speaking at FerrAus? extraordinary general meeting to approve its $35 million capital raising today, FerrAus executive director Bryan Oliver said the idea has merits, particularly as FerrAus project is de-risked.
He said the idea has been discussed with Brockman, with the major issue being the relative valuation of the two companies? projects.
?There are always discussions. But one of the difficulties always comes with the stage of the development and then the market capitalisation, which is the reality you?re dealing with, may not reflect the underlying intrinsic value [of the projects] until you get further de-risking,? said Mr Oliver.
When the bids were launched Wah Nam?s all-scrip bid for FerrAus valued the company at around $230 million, around a quarter of the $930 million valuation of Brockman.
But Mr Oliver said that relative valuation will change as FerrAus moves closer to completing the definitive feasibility studies on its flagship Pilbara iron ore project, due at the end of the year.
Leaving aside the relative stages of the projects, Mr Oliver said the valuation of the two projects is closer to two to one on a net present value and life on mine basis, rather than the bigger multiple implied in the Wah Nam bid.
?But at some stage I would expect we?d move closer together, and if you get to a point where each party can put up a proposition that is of interest to their shareholders - then is probably the time you?ll see some movement, but it?s been very difficult to reach a common landing based on value,? said Mr Oliver.
Wah Nam bid setback
Mr Oliver?s comments came as the rest of FerrAus shareholders delivered a blow to the Hong Kong company?s takeover hopes by approving a dilutionary capital raising.
Wah Nam voted its 20 per cent holding against the motion to approve the $35 million FerrAus raising, but other shareholders voted overwhelmingly in favour.
The raising triggers a defeating condition in Wah Nam?s takeover bid, and the company will now have to decide whether to push ahead with its move or retire gracefully from the field.
PerthNow understands that it would be difficult for Wah Nam to participate in the $35 million raising under Australian takeover laws, as the company is restrained from buying shares for cash when it has an all-scrip bid in play.
The raising will also likely be conducted at a different share price to the valuation implied by the Wah Nam bid, throwing more difficulties in the way of the Hong Kong company.
Mr Oliver said he was unsure what Wah Nam?s next move would be, but the company had not approached FerrAus seeking to take part in the raising to date.
FerrAus shares were down 2.5c to 94c, and Brockman shares were down 4c to $4.96, at 1310 AWST.
FRS Price at posting:
94.0¢ Sentiment: Buy Disclosure: Not Held
