Anvil defends surrender to $1.28b Chinese offer Kate Emery 1 October 2011 Source: The West Australian
Anvil Mining has defended its decision to agree to a $C1.3 billion ($1.28 billion) Chinese takeover with the copper price at a 12-month low and an expansion of its flagship African mine just months away.
Anvil chief executive Darryll Castle said the dual-listed Perth-based miner “didn’t have the luxury of timing” after its biggest shareholder, European commodities trader Trafigura, flagged plans to offload its 37 per cent stake.
Trafigura’s decision triggered a company-wide review by Anvil in July, the result of which was the agreed $C8-a-share cash takeover by China’s acquisitive Minmetals yesterday.
“I’m sure there’ll be investors who have been with the company for a long time and will feel a sense of regret (at the takeover),” Mr Castle said. “Then there’ll be newer investors for whom this will be a good exit point.”
Minmetals, which through its Australian arm MMG owns the Golden Grove base metals mine east of Geraldton and other local assets acquired from OZ Minerals, already has a strong hold on its target. Investors representing 40 per cent of Anvil shares, including Trafigura, have backed the deal.
Minmetals missed out on Zambian copper miner Equinox Minerals this year when its bid was trumped by Barrick Gold.
Although its bid for Anvil was at a 39 per cent premium to its pre-deal share price, Anvil shares traded as high as $6.97 in April before volatility on global sharemarkets hit commodity prices. Anvil is also in the midst of ramping up an expansion at its Kinsevere mine in the Democratic Republic of Congo, which will see it producing at an annual rate of 60,000 tonnes of copper from 2012.
Anvil’s ASX-listed shares soared $1.85 to $7.65 yesterday.
Mr Castle also defended the company’s disclosure practices after it hosed down speculation of a Chinese takeover two weeks ago.
“The nature of a transaction is that until you have a transaction you don’t have a transaction,” he said. “At that point we didn’t have anything to report.”
Minmetals chief financial officer David Lamont said Anvil’s assets were an “excellent fit” with Minmetals’ strategy to grow its upstream base metals business and would open the door for a geographic expansion.
Mr Lamont said the uncertain global climate had thrown up acquisition opportunities but had not triggered Minmetals’ interest in making an acquisition in the region.
“This is something that we’ve been looking at for a number of years,” he said.
“We are very much focused on looking at the medium and long-term value.”
The Minmetals-Anvil deal has analysts pointing the finger at fellow African miner, Tiger Resources, as another possible target.
BREAKING BAD $C53.2m The break fee, in millions of Canadian dollars, that Anvil has to pay Minmetals if the agreed takeover does not go ahead.
Reverse break fees could become the norm TIM KILADZE 30 September 2011 Source:The Globe and Mail (Breaking News)
In a choppy market, you would think that the acquirer in an M&A deal bears all the risk. If they buy a company, and the market moves south, management often falls under fire from investors.
These days, targets are saying the same thing. If they agree to a friendly deal, and then the markets turn sour before the shareholder votes, there’s the risk that the acquirer could walk away.
For that reason, reverse break fees are becoming more common. These payments are made by the acquirer if they decide to walk away from the deal. In essence, they act as insurance for a target who has gone out on a limb and gotten its board on side with a takeover offer.
The latest break fee appears in Minmetals Resources Ltd.’s $1.3-billion bid for Anvil Mining Ltd . If Minmetals decides to walk away, it will have to pay Anvil $20-million. (And Anvil will have to pay a typical break fee of $53-million if agrees to be bought by someone else.)
Anvil chief executive officer Darryll Castle addressed the issue in an interview with The Globe and Mail on Friday. In times like this, “the buyer wants to make sure that if things really get bad, they can walk away," he said. “By the same token, we want to make sure that we’re not just giving the buyer a free option.”
“It’s absolute balance that you try to aim for," he added. “In the market circumstances now, I think it was warranted to have a reverse break fee.”
That structure is becoming much more common, and there is chatter on Street that reverse break fees will stick around, especially if the market stays volatile.
Globe and Mail Update Chinese outline $1.3bn bid for Anvil MATT CHAMBERS 1 October 2011 Source:The Australian TAKEOVERS
CHINA'S Minmetals Resources has made a $1.3 billion friendly cash bid for Perth-based copper play Anvil Mining, taking advantage of slumping global markets to boost its grip on global copper production.
The tilt for Anvil, which operates in the Democratic Republic of Congo (DRC), comes after the Melbourne-based, Chinese-controlled Minmetals was outgunned by Barrick in a $C7bn takeover battle for Zambian copper play Equinox earlier this year.
This time, success is more likely, with the recommendation of Anvil's board secured after an auction by the target conducted by BMO Capital.
Having failed to gain a big slice of resources projects in developed countries -- most notably in a failed $US19bn deal with Rio Tinto in 2009 -- China has turned more to Africa to secure the vast mineral resources needed to fuel its rapid growth.
While this takeover comes after a company auction, China has been successful in getting mining deals in many parts of the resource-rich, but often risky, continent, by building local infrastructure.
Minmetals, which is run by former WMC Resources boss Andrew Michelmore, has agreed to pay $C8 a share for Australian and Toronto-listed Anvil.
This is a 30 per cent premium to the 20-day weighted average price.
Yesterday, Anvil's shares increased by $1.85 -- or 32 per cent -- to a three-year high of $7.65.
Mr Michelmore, who has said his acquisition targets are chosen in Melbourne, not Beijing, said the takeover would expand Hong Kong-listed Minmetals' footprint and boost its exposure to copper.
``Minmetals' aim is to build an international mining group based on a unique operating model that brings together the skills and experience of an international management team with the long-term commitment of a major Chinese corporation as its major shareholder,'' Mr Michelmore said.
Yesterday, Minmetals chief financial officer David Lamont said sliding markets had not driven the company's interest in the DRC but had provided the opportunity to get in.
``What the current market has done, I think, is lead a number of companies to review their overall position,'' Mr Lamont said.
``Clearly, Anvil was one of those and it created the opportunity for us.''
The Zambian copper belt that houses Equinox's Lumwana mine also stretches into the DRC and is where Anvil's 60,000 tonnes a year Kinsevere project sits.
The acquisition will mean copper replaces zinc as Minmetals' main product.
Mr Lamont shrugged off the risk of operating in DRC.
``We have looked at the DRC and have accepted the political position there,'' he said.
``The strong ties that China, from the diplomatic side of things, have with the DRC give us some comfort to operate in that region.''
Minmetals has locked up 40.1 per cent of Anvil already.
* Anvil Mining is a copper producer in the Democratic Republic of Congo, where it has been in production since 2002
* The company's current focus is on completing the Kinsevere Stage II Project; a $400 million solvent extraction and electro-winning plant that is expected to produce 60,000 tonnes of LME-grade (London Metal Exchange) copper cathode per year
* The Kinsevere mine had its first production of copper cathode in early May
AVM Price at posting:
$7.65 Sentiment: None Disclosure: Held
(20min delay)