higher bid will come or no deal

Hi El and all,

The higher bid has to come and will , either by Xstrata to get the funds on side or by one of the big boys.

read the following article.

jojo

Xstrata's takeover bid comes up short
ANDY HOFFMAN


Monday, March 26, 2007

The premium attached to Xstrata PLC's $4.6-billion takeover bid for nickel miner LionOre Mining International Ltd. is too slim and several institutional shareholders said they won't tender their shares to the all-cash takeover bid in hopes of wresting more money out of the friendly buyer.

Xstrata, which has swelled in size over the past few years with an aggressive acquisition strategy led by chief executive officer Mick Davis, is offering $18.50 a share for Toronto-based LionOre, a 5.8-per-cent premium to Friday's closing share price of $17.49 on the Toronto Stock Exchange.

The takeover's premium, when weighed against share levels before the offer, appears paltry compared to other recent deals in the sector, including the Anglo-Swiss miner's winning of bid of $62.50 a share for Falconbridge Ltd. last summer, an $18-billion transaction. Fund managers said Xstrata will have to do better if it wants to win the support of two-thirds of LionOre shareholders needed for the deal to be approved.

“The company is being stolen,” said Bill Belovay, who manages the BMO Resource Fund, which owns 1.1 million shares, or about 0.5 per cent of LionOre's outstanding shares.

“I think it's unfair. It's unfair to shareholders,” he said, adding that LionOre management “just lies down and doesn't even fight.”

However, unlike last summer's frenzy of takeover bids for both Falconbridge and Inco Ltd., the prospective purchase of LionOre, which has nickel mining operations in Western Australia, Botswana and South Africa, comes amid a record surge in nickel prices.

The metal has soared 62 per cent so far this year on expectations of continued strong demand from China.

Colin Steyn, LionOre's president and chief executive officer, said current price levels are unsustainable over the long term and could damage the manufacturing industries that need nickel to make stainless steel and other alloys.

“We see the nickel price at unprecedented levels and probably at a level, if it continued to increase, that could actually have value destruction in the industry it supports,” he said in a press conference.

Xstrata, which codenamed its bid “Androcles” after the Roman slave who pulled the thorn out of a lion's paw, has won so-called lock-up agreements with nearly a fifth of LionOre's shareholders who have agreed to tender their shares to the bid. LionOre directors and management, holding 3 per cent, have agreed to submit their shares along with roughly 16 per cent of shareholders that Mr. Steyn described as “people who have been investors in this company since the beginning and have not relinquished their shares.”

Among them is Bob Disbrow, a stockbroker at Haywood Securities Inc. in Toronto, who would only say he has a “significant” stake in LionOre.

LionOre is prohibited from soliciting other bids and if it accepts a superior proposal from another suitor, Xstrata is entitled to a $130-million break fee. It also has the right to match a higher bid.

“We've looked at the company. We believe we have made a fair and reasonable offer to shareholders and we have the right to match and that's where to be,” said Ian Pearce, CEO of Xstrata Nickel.

For much of the recent rise in metal prices, LionOre had struggled with production problems at two of its key mines and had continually disappointed shareholders. However, the miner, which produced 34,000 tonnes of nickel in 2006, began to turn things around in the third quarter of last year.

After losing $76-million (U.S.) in 2005, it swung to a profit of $428-million last year. Before the Xstrata offer, its shares had gained 270 per cent over the past year.

The company hired investment banker JPMorgan Cazenove to explore its alternatives last year. Mr. Steyn said four interested parties signed non-disclosure agreements that gave them access to a data room with the company's confidential information.

“At this stage they haven't led to an offer,” Mr. Steyn said.

According to sources, Russian giant Norilsk Nickel Group was among the interested parties. Vancouver's Teck Cominco Ltd. is also believed to have had a look, but is thought to be no longer interested in LionOre, whose shares gained $1.80 (Canadian) to $19.29 in heavy trading of more than 35 million shares on the TSX Monday.

Even without a competing offer, Benoit Brillon, of NatCan Investment Management Inc., which owns roughly 3.5 million LionOre shares or about 1.6 per cent of the miner, said Xstrata will have to pony up more cash if it wants to succeed. “Is it high enough? I don't think so,” said Mr. Brillon, who added that although Xstrata “seems to have a lock-up on a significant amount on shares, I don't think they're going to get it at this level.”

Charles Oliver, the lead manager of the AGF Canadian Resources Fund said he was sad that LionOre, the largest pure-play nickel producer left on the Toronto Stock Exchange, was on the verge of disappearing. He said his company, which owns roughly 5.5 million LionOre shares, was not impressed with the offer.

“The premium is not really healthy. I'm not sure I want to part with it,” he said.

Several analysts had a target price of $20 or more for LionOre, who although officially based in Toronto, has its top executives posted in London.

Macquarie Bank Ltd. and TD Securities Inc. are Xstrata's financial advisers on the deal.