CONDITIONAL CASH OFFER OF A$1.30 PER SHARE FOR 100% OF UMC SHARE...

CONDITIONAL CASH OFFER OF A$1.30 PER SHARE FOR 100% OF UMC SHARE CAPITAL FROM BHP BILLITON
The Directors of United Minerals Corporation (“UMC”) announce that they have received a conditional offer, under which a subsidiary of BHP Billiton Limited (“BHP Billiton”) proposes to acquire all of the issued shares in UMC via a board recommended Scheme of Arrangement (“Scheme”).
Under the proposed Scheme, BHP Billiton will offer UMC shareholders consideration of A$1.30 cash for each UMC share they own. The transaction values UMC at approximately A$204 million.
BHP Billiton has advised UMC that its offer is final in the absence of a competing proposal.
The proposal eliminates all project risk for UMC shareholders, offers certain cash in uncertain times and is based on material premiums to historical market prices. In particular, it represents:
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a 43% premium to UMC’s closing share price on Tuesday 6 October 2009, being the date at which UMC shares were placed in trading halt following the receipt of BHP Billiton’s proposal;
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a 29% premium to the one month volume weighted UMC share price;
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a 35% premium to the three month volume weighted UMC share price; and
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a 36% premium to the six month volume weighted UMC share price.
Background
UMC’s principal asset is the Railway iron ore deposit which is directly adjacent to the Mining Area C project in the Pilbara region of Western Australia.
In early 2009, BHP Billiton held confidential discussions with UMC about a possible corporate transaction and completed a technical due diligence review of the Railway deposit. The parties were unable to reach agreement on a corporate transaction value at that time.
On 8 September 2009 UMC announced a proposed transaction with China Railway Materials Commercial Corp. Group (“CRM”) which involves a conditional placement to CRM. Completion of the placement to CRM is subject to satisfaction (or waiver) of the following conditions:
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satisfactory outcome of due diligence by CRM on the Company;
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CRM receiving written notification under the Foreign Acquisitions and Takeovers Act 1975 that the Australian Commonwealth Government has no objection under its foreign investment policy or under the Act to the placement by the Company to CRM;
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CRM obtaining various Chinese regulatory approvals; and
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Signing of a 3 million tonnes per annum Iron Ore sales contract for 10 years with CRM on terms acceptable to the parties in their absolute discretion.
The conditions must be satisfied (or waived) by 7 December 2009 or such later date as the parties may agree.
Subsequent to the announcement of the CRM transaction, BHP Billiton presented its proposal to UMC.
Merger Implementation Agreement
To enable the company to bring the BHP Billiton offer to shareholders, UMC has entered into a Merger Implementation Agreement (“MIA”) with BHP Billiton under which UMC has agreed to propose a Scheme of Arrangement between UMC and its shareholders for the acquisition of UMC shares by BHP Billiton.
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.
A summary of key terms of the MIA is attached as Annexure A to this announcement.
Annexure A sets out the conditions that need to be satisfied or waived in order for the Scheme to be implemented. Key conditions include:
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UMC not proceeding with the proposed issue of UMC options pursuant to the prospectus dated 10 September 2009; and
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The CRM placement / off take not being completed.
The transaction is also subject to a number of customary conditions precedent, including receipt of required approval from regulators and Australian court approvals, as well as approval by UMC shareholders at the Scheme meeting.
The MIA contains customary terms typical for a transaction of this nature including no shop and no talk exclusivity provisions, a break fee of 1% of transaction value payable in certain circumstances (although not linked to the outcome of the UMC shareholder vote in relation to the scheme transaction) and the right for BHP Billiton to match any competing proposal that may emerge.
Comment
Mr Alan Birchmore, Chairman of UMC, offered the following comment:
“The CRM transaction had a number of attractions for the Company, but the BHP Billiton proposal crystallises value for all UMC shareholders now. When we acquired the iron ore project three years ago, the Company was valued at around A$20 million. There was no outcropping to guide our geologists, and the find at Railway is a virgin discovery with a lot of hard work being undertaken to advance the project to its current position. The BHP Billiton proposal now values the discovery and the Company at over A$200 million. By any measurement this is a great result and it offers all of our shareholders an opportunity to deal away the significant development risks which we would need to overcome to bring the deposit into production.“
Mr Matthew Hogan, CEO stated ”The BHP Billiton Offer is an attractive proposal. It provides all UMC shareholders with a substantial premium and the certainty of a cash price”.
Advisers to the transaction
UMC’s financial adviser is UBS AG, Australia Branch and its legal adviser is Blakiston & Crabb.
BHP Billiton’s financial adviser is Gresham Advisory Partners and its legal adviser is Mallesons Stephen Jaques.
This information is available on the Company website at www.unitedminerals.com.au
For further information please contact:
Matthew Hogan – (08) 9481 0911 Barry Fehlberg – (08) 9481 0911
CEO / Executive Director Executive Director Exploration
Annexure A Summary of Key Terms of Merger Implementation Agreement (MIA)
Implementation of the Scheme is subject to the satisfaction or waiver of following conditions precedent:
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receipt of necessary government agency approvals and no court or regulatory authority taking steps to restrain or prevent the Scheme;
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UMC shareholders and the court approve the Scheme;
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all outstanding options to acquire UMC shares are exercised or acquired by BHP Billiton;
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the independent expert to be appointed by UMC concludes that the Scheme is in the best interests of UMC shareholders;
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no “Prescribed Event” or “Material Adverse Change” (as defined in the MIA) occurs;
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no third party to any material agreement or instrument to which UMC or its subsidiaries are parties, exercises any of its rights under any change of control provisions in those agreements or instruments;
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net working capital of the UMC group remains greater than nil;
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UMC enters into arrangements to give effect to the operational restructure (referred to below);
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the MIA not being terminated;
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no information arising up until 7 December 2009 which results, or would be reasonably likely to result in, a “Material Adverse Change”;and
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UMC complies with any obligations under the arrangements with China Railway Materials Commercial Corp. Group (“CRM”).
UMC has agreed to conduct a restructure of its operations and dispose of certain of its assets so that on the Effective Date UMC only holds the assets relating to the Railway Deposit.
The MIA provides the following termination rights in addition to standard contractual termination rights:
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by either BHP Billiton or UMC, if the Scheme has not become effective before 30 April 2010;
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by BHP Billiton, if UMC directors withdraw or adversely change their recommendation of the Scheme;
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by UMC, if a “Superior Proposal” (as defined in the MIA) arises and is recommended to be in the interests of the UMC shareholders;
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by BHP Billiton if another person acquires more than 20% of UMC shares; and
by either BHP Billiton or UMC if the independent expert appointed by UMC opines that the Scheme is not in the best interests of UMC shareholders.
UMC has agreed that it will not solicit, invite, facilitate, encourage or initiate any enquiries, negotiations or discussions in relation to a competing transaction for control of UMC (“no shop obligation”); will not negotiate or enter into discussions with any person in relation to a competing transaction for control of UMC (“no talk obligation”); and will promptly inform BHP Billiton if UMC receives an unsolicited approach in relation to a Competing Transaction or receives a request for, or provides, information relating to UMC group, which UMC has reasonable grounds to suspect may relate to a Competing Transaction.
UMC must also disclose to BHP Billiton all material details of any Competing Transaction.
The “no talk” obligation does not apply to unsolicited bona fide Competing Transactions which UMC board determines that the Competing Transaction could reasonably be considered to become a Superior Proposal and failure to respond to that Competing Transaction would be reasonably likely to constitute a breach of the board’s fiduciary or statutory obligations.
BHP Billiton has a right to match any Superior Proposal.
UMC has agreed to pay BHP Billiton an amount equal to 1% of the aggregate scheme consideration, if the Scheme does not proceed because:
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a Competing Transaction that is reasonably capable of being completed and is more favourable to UMC shareholders than the Scheme is announced or is open for acceptance;
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one or more of UMC’s directors changes their recommendation of the Scheme, unless the change follows receipt of the independent expert’s report opining that the Scheme is not in the best interests of UMC shareholders;
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BHP Billiton validly terminates the MIA because UMC is in material breach of the MIA;
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UMC breaches no shop or no talk obligations or fails to inform BHP Billiton of a Competing Transaction;
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of a Superior Proposal arising;
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a “Prescribed Event” or a “Material Adverse Change” occurs prior to the second court hearing to approve the Scheme and the MIA is terminated;
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BHP Billiton terminates the MIA because UMC has failed to comply with its obligations under its arrangements with CRM.
BHP Billiton has agreed to pay UMC an amount equal to 1% of the aggregate scheme consideration, if the Scheme does not proceed because BHP Billiton breaches the MIA and UMC terminates the MIA.