takeover talks keep oxiana buoyed

Andrew Trounson | May 13, 2008

OXIANA shares continue to be buoyed by speculation it is a target, following the release of valuation documents on its proposed $10.5 billion friendly merger with Zinifex.

Grant Samuel, Zinifex's independent experts, has valued Oxiana shares at $3.85-4.35 a share, a premium to its close yesterday at $3.54.

Yesterday's valuation and merger scheme booklet will be key for any predator considering gate-crashing and launching a bid for either company.

Rumours last week focused on Oxiana's potential to be targeted, with Xstrata the perennially tipped predator.

Shares in Oxiana outperformed Zinifex, rising 1.7 per cent, whereas Zinifex fell 5c, or 0.5 per cent, to $10.42.

Grant Samuel has valued Zinifex at $12.72-14.25 a share.

Oxiana has offered 3.1931 of its shares for each Zinifex share held in what has been billed a 50-50 merger of equals.

Grant Samuel concluded that Zinifex was contributing about 51 per cent of the underlying value of the merged entity, and said the merger was fair to Zinifex shareholders and that it would deliver material benefits.

"It appears reasonable to expect some positive share market re-rating of (the merged company), which should have enhanced access to both equity and debt capital," Grant Samuel said.

Grant Samuel said its Oxiana valuation was largely based on its growth projects and commodity prices, while its Zinifex valuation was less exposed to commodity markets because it held $1.5 billion in cash.

That was equivalent to about 20 per cent of its market value in February when the friendly merger was announced.

If approved, the merged company will start trading on July 7.

THE AUSTRALIAN.........