macquarie banks on offer for extract afr 05/05

Macquarie banks on offer for Extract

The Australian Financial Review
PUBLISHED: 05 May 2011 Online
Street Talk
Edited by Sarah Thompson and Stephen Shore

Extract Resources, whose huge Husab uranium deposit in Namibia has attracted the attention of the Chinese, has earned an upgraded 'outperform' rating from Macquarie amid a flurry of corporate interest in the stock.

China Guangdong Nuclear Power is clearly still interested in taking over Extract's biggest shareholder, Kalahari Minerals, even though it is seeking to cut its offer price by 7 per cent and has delayed the target date for proceeding with a firm offer.

Whether it would then proceed with an offer for Extract is still in doubt, but Macquarie estimates the look-through value of China Guangdong's proposed �2.70 per share offer for Kalahari is between $9.60 and $10.35, well above Extract's closing price yesterday of $7.63. Hence the upgrade in the call on the stock, although Macquarie does point out that there is a risk that no firm offer will materialise.

The Takeover Panel in the UK, which is objecting to the proposed cut in the offer price, is still something of a hurdle for China's bid for London-listed Kalahari.

Macquarie believes the panel is "unlikely to show flexibility" by allowing a lower bid, even if the board of Kalahari has agreed, given the slump in global uranium equities in the wake of the Japanese nuclear crisis.

Mining giant Rio Tinto remains in the background, providing something of a floor for Extract, given it has stakes in both Extract and Kalahari and is keen to get in on the development of Husab, which lies right next to its Rossing mine, which is nearing the end of its life.

http://www.afr.com/p/opinion/macquarie_banks_on_offer_for_extract_JxHYqRk2nKFUlI5A1PZkYP?hl