LionOre Mining International Ltd (C-LIM) - News Release
LionOre gets all-cash $18.50 bid from Xtrata
2007-03-26 04:14 ET - News Release
Shares issued 218,859,895
LIM Close 2007-03-23 C$ 17.49
Mr. Ian Hamilton reports
XSTRATA ANNOUNCES FRIENDLY C$18.50 PER SHARE CASH OFFER FOR LIONORE
Xstrata PLC and LionOre Mining International Ltd. have entered into a support agreement for an all-cash offer to acquire all of the issued and outstanding shares of LionOre by way of a friendly takeover bid. The offer is for $18.50 per share, valuing the transaction at approximately $4.6-billion ($4-billion (U.S.)). The offer represents a 5.8-per-cent premium over the closing price of $17.49 per LionOre share on the Toronto Stock Exchange on March 23, 2007, and a 16.5-per-cent premium over the volume-weighted average price of the LionOre shares over the last 30 trading days on the TSX.
The support agreement between Xstrata and LionOre provides for, among other things, a non-solicitation covenant on the part of LionOre, subject to customary "fiduciary-out" provisions that entitle LionOre to consider and accept a superior proposal, a right in favour of Xstrata to match any superior proposal and the payment to Xstrata of a termination payment of approximately $130-million, if the acquisition is not completed as a result of the superior proposal.
In connection with the offer, certain shareholders including directors and officers of LionOre, have entered into irrevocable lockup agreements with Xstrata pursuant to which they have agreed to deposit all of their LionOre shares under the offer, subject to certain exceptions, representing approximately 19 per cent of the issued and outstanding LionOre shares.
The board of directors of LionOre, after consultation with its financial and legal advisers, has unanimously approved entering into the support agreement and recommends that LionOre shareholders tender to the offer. JP Morgan, acting as financial adviser to the LionOre board, has provided an opinion that the offer is fair, from a financial point of view, to LionOre shareholders.
The offer represents the culmination of a strategic review process by the LionOre board to maximize value for its shareholders. The offer, in the view of the LionOre board, represents the most attractive and certain value for LionOre shareholders. Xstrata Nickel has undertaken extensive and detailed due diligence to ensure that LionOre operations, projects and upside potential are understood and reflected in the offer.
Successful completion of the transaction will strengthen Xstrata's position as a significant participant in the nickel industry, and ensure that the growth potential in the LionOre portfolio can be optimized through its combination with Xstrata Nickel's downstream processing facilities. Xstrata Nickel will also increase its degree of vertical integration and gain geographic and technical diversification across its operations.
The offer documents are expected to be mailed by April 6, 2007. The offer will be open for acceptance for a period of not less than 35 days and will be conditional upon, among other things, valid acceptances of the offer by LionOre shareholders owning not less than 66-2/3 per cent of the LionOre shares on a fully diluted basis. In addition, the offer will be subject to certain customary conditions, relevant regulatory approvals including in Canada, Australia and South Africa, the absence of a material adverse change with respect to LionOre, and a waiver of the LionOre shareholder rights plan implemented by the LionOre board as it may pertain to the offer. Once the 66-2/3-per-cent acceptance level is met, Xstrata intends to take steps available to it under relevant securities laws to acquire any outstanding LionOre shares. Xstrata may waive the conditions of the offer in certain circumstances.
Colin Steyn, president and chief executive officer of LionOre, said: "We are very pleased to support this offer. The bid offers clear value to shareholders, and also positions our operations and employees as part of a growing, successful global nickel producer. This is an extremely attractive opportunity for our shareholders to lock in the substantial growth in value they have seen recently in their investment. To realize cash at this point in the commodity cycle eliminates the risk that our shareholders would remain exposed to as a stand-alone group, and enables them to realize value for their investment at a time of historically high nickel prices."
Ian Pearce, chief executive officer of Xstrata Nickel, noted: "The combination of LionOre with Xstrata Nickel brings together two very complementary businesses and creates significant opportunity for the enlarged Xstrata Nickel business. This is an important step in our strategy to grow Xstrata Nickel into a truly global nickel business. With LionOre, we unleash opportunities to create value through additional production, strong synergy potential, access to new markets and increased opportunities for growth, and through optimization of technology. There is a unique industrial logic in the combination of these two businesses which is recognized in the price being offered to LionOre shareholders."
The acquisition of the LionOre shares will be financed through Xstrata's existing credit facilities and cash on hand.
Mr. Steyn has been a director of LionOre since 1998 and was appointed president and chief executive officer in 1999. Ted Mayers, chief financial officer, has been a director of LionOre since 1997 and was appointed chief financial officer in 2002. Mr. Steyn and Mr. Mayers are key individuals important to LionOre.
The book value of the gross assets of LionOre as at Dec. 31, 2006, was $1.72-billion (U.S.). In the 12 months ended Dec. 31, 2006, LionOre recorded operating earnings of $533.3-million (U.S.) and net earnings of $428.5-million (U.S.).
Subject to the provisions of the support agreement between Xstrata, Xstrata Canada Acquisition Corp. and LionOre, the offer will be made by the offeror, a wholly owned indirect subsidiary of Xstrata.
Macquarie Bank Ltd. and TD Securities Inc. are acting as financial advisers and Davies Ward Phillips & Vineberg LLP and Freshfields Bruckhaus Deringer are acting as legal counsel to Xstrata. JP Morgan is acting as financial adviser and McCarthy Tetrault LLP is acting as legal counsel to LionOre.
North American Investment market call
A conference call with senior management of Xstrata Nickel and LionOre for the North American investment community has been scheduled for March 26, 2007, at 9 a.m. (Toronto time)/2 p.m. U.K. (BT). Members of the investment community may participate by dialling 1-800-379-4140 within North America and 416-641-6677 outside of North America. The live audiocast will be available from the company website and available as an archive from Xstrata's website and LionOre's website following the event.
Media conference
A media conference with Mr. Pearce and Mr. Steyn will be held today, March 26, 2007, at 10:30 a.m. (Toronto time)/3:30 p.m. U.K. (BT) at the TSX Gallery at 130 King St. West, Toronto. Media representatives who are unable to attend may participate by dialling 1-800-354-6885 within North America and 416-641-6652 outside of North America.
Each of Macquarie Bank Ltd. and TD Securities is acting exclusively for Xstrata and no one else in connection with the offer and will not be responsible to anyone other than Xstrata for providing the protections afforded to its clients or for providing advice in relation to the offer and/or any other matter referred to in this announcement.
No statement in this announcement is intended as a profit forecast and no statement in this announcement should be interpreted to mean that earnings per Xstrata ordinary share for the current or future financial years would necessarily match or exceed the historical published earnings per Xstrata ordinary share.
We seek Safe Harbor.
AI
