Ross18801 - here's the full...

Ross18801 - here's the full article:

http://news.ninemsn.com.au/article.aspx?id=876712

BHP Billiton makes takeover move on UMC

18:32 AEST Fri Oct 16 2009
By Xavier La Canna

Another major Chinese company has been thwarted in a bid to buy a stake in an Australian miner of prized Pilbara iron ore.

BHP Billiton Ltd has offered cash to take over United Minerals Corporation NL (UMC), forcing the smaller company to consider turning its back on a groundbreaking investment planned with China Railway Materials Commercial Corp Group (CRM).

Under the deal announced Friday, UMC shareholders would be offered $1.30 for each UMC share, valuing the minerals explorer at $204 million.

UMC shares resumed trading after being suspended since October 7 and rose sharply on the news, closing up 36 cents, or 39.56 per cent, to $1.27.

The BHP Billiton offer, which has been unanimously recommended by UMC directors, is conditional on UMC not going ahead with a major deal with CRM.

It is the second time a move by BHP Billiton has apparently hampered a major Chinese investment in the Pilbara, in Western Australia's north.

In June, BHP Billiton signed a non-binding agreement with Rio Tinto to combine the two companies' huge iron ore operations in the Pilbara.

When the deal was announced Rio Tinto turned its back on a controversial $US19.5 billion deal it had been considering by Aluminum Corporation of China (Chinalco).

Bell Potter Securities client adviser Chris Kimber said he was surprised UMC directors had recommended BHP Billiton's offer after agreeing to a deal with CRM.

"I can't believe that they would just do anything like that after it was agreed (with CRM)," Mr Kimber said.

The planned deal between UMC and CRM last month would have included a $27.2 million placement to CRM at $1.35 per share, made up of 20 million shares and two million options.

It also included an iron ore offtake agreement.

At the time the planned deal was described as "groundbreaking" and a "significant milestone" for the company and would have given CRM 11.4 per cent of the company.

On Friday UMC chief Matthew Hogan told AAP his company remained in negotiations with CRM, and the BHP Billiton agreement would only proceed if the CRM deal fell through.

"If the completion doesn't take place with China Railway (CRM), then BHP is proceeding," he said.

CRM joint venture partner RIMCapital Limited is understood to be fuming that BHP Billiton's offer was being recommended to UMC shareholders.

In a brief statement RIMCapital said it was reviewing the announcements from BHP Billiton and UMC and would keep the market informed of developments.

RIMCapital's shares finished the day down one cent, or 16.67 per cent, at five cents.

UMC chairman Alan Birchmore said the BHP Billiton proposal was being recommended because it crystallised value for his company's shareholders now.

"The directors have agreed to unanimously recommend BHP Billiton's offer (which is conditional on the CRM placement not being completed) in the absence of a superior proposal," he said in a statement.

UMC has been seen as a good fit for BHP Billiton because its principal asset, the Railway iron ore deposit, abuts one of the mining giant's iron ore projects in the Pilbara.

Speculation BHP Billiton is set to undertake a series of acquisitions has been rife, and the company had about $US10.833 billion ($A11.77 billion) in cash at June 30, accounts show.

BHP Billiton iron ore president Ian Ashby on Friday said the UMC takeover was logical because his company had an established mine and railway near the Railway deposit.

"This acquisition is consistent with our plan of capturing growth options to deliver long term shareholder value," Mr Ashby said.

UMC's iron ore deposit has an indicated and inferred resource of 122.36 million tonnes.

The transaction is yet to be voted on by UMC shareholders.

Shares in BHP Billiton closed up 30 cents at $39.20.