portman shareholders sitting pretty after bid

Portman shareholders sitting pretty after bid

12th September 2008, 11:45 WST

The remaining shareholders of iron ore miner Portman had more reasons to smile this morning as the firm’s share price continued its upwards trajectory following US steel group Cleveland Cliffs’ bid to fully acquire the company.

Shares in Portman were up a further 5¢ or 0.24 per cent to $21.15 this morning, after Cleveland-Cliffs bid $21.50 for every share in the 14.8 per cent stake of the firm it does not already own.

The cash offer values the minority interests at $560 million, just $115 million less than Cleveland Cliffs paid to buy the lion's share of the company three years ago.

Its shares leapt $3.40 to an all-time high of $21.10 yesterday on the news.

The proposed buy-out confirms Cleveland-Cliffs picked up a bargain in 2005, when it snared control of Portman at $3.85 a share via a takeover which divided the target's board.

The higher offer reflects three years of sharply rising iron ore prices, which have fattened Portman's profits.

Independent directors Michael Perrot and Malcolm MacPherson said they would recommend the offer subject to an independent valuation from KPMG and in the absence of a superior bid.

“We think the offer is a good one,” Mr Perrot said.

There is little chance of a rival bid, given Cleveland Cliffs already holds 85.19 per cent of Portman, with the company ruling the bid final.

“For Cleveland-Cliffs shareholders, this transaction is designed to enable Cleveland-Cliffs to move to full ownership of Portman,” Cleveland-Cliffs chief executive Joseph Carrabba said in a statement.

“I believe this final cash offer represents outstanding value for Portman shareholders and provides an excellent opportunity for shareholders to realise value from their investment in Portman.”

Also yesterday in a further sign Cleveland Cliffs is keen to expand its WA footprint it announced plans to take a 30 per cent stake in junior metals explorer AusQuest for $26 million.

Under the terms of the deal Cleveland Cliffs will pick up 66.7 million shares in AusQuest at 40¢ to give it a 30 per cent stake.

It will also be issued about 29 million options exercisable at 40¢. Cleveland Cliffs will be unable to acquire any more shares, other than in certain agreed situations, such as placements, until November 2010.

AusQuest shares leapt 50 per cent or 9.5¢ on the news to close at 28.5¢, but were slightly lower today, down 3.5¢ or 12.3 per cent to 25¢ at 11.30am.

ANDREW HOBBS and KATE EMERY