hedge fund attacks lion on indophil sale plan

From "The Age":

Hedge fund attacks Lion on Indophil sale plan


* Barry Fitzgerald
* June 4, 2008
*

PLANS by Melbourne-based Lion Selection to sell its stake in Indophil to Xstrata for $1 a share have come under attack from London hedge fund Carrousel Capital.

The move raises the prospect that Indophil can turn the tables on Lion, its 25.4% shareholder, with its scrip takeover bid for the group.

Carrousel holds more than 3% of Lion and said Xstrata's bid for Indophil was sufficiently low-ball for it to vote against resolutions at Lion's June 23 extraordinary meeting to seek shareholder approval to accept the Xstrata offer.

The Xstrata offer and Lion's pre-bid acceptance for the bulk of its Indophil stake followed Indophil's scrip bid for Lion, which was driven by Indophil's fear that Lion could do exactly what it is proposing to do — sell its Indophil stake to Xstrata at what it considers a low bid.

Indophil is Xstrata's junior partner in the world-class Tampakan copper/gold deposit in the Philippines. It is one of the world's biggest undeveloped copper deposits and is planned to be brought into production by 2012-13. Indophil has been angling to remain a fully funded partner in the development but Lion has other ideas as it sets about defending itself from the Indophil takeover.

Carrousel said it believed Xstrata's bid for Indophil undervalued the company. "Lion is a major shareholder of Indophil. The predicted cash flows of the Tampakan project are likely to be strong and would suggest that, if managed effectively, could deliver considerable returns for both Indophil and Lion shareholders," Carrousel said.

Carrousel said it welcomed other initiatives announced by Lion since Indophil announced its bid, namely its capital management initiatives and plans to return cash to shareholders.

"However, in the absence of a significantly improved offer for Indophil, we will be voting against resolutions 1 and 2 (concerning the sale of the Indophil investment) put forward for the Lion extraordinary general meeting." the hedge fund said. "This price is unacceptable to us."

Lion closed 0.15¢ lower at $1.82.