SYDNEY: Australian miner Oxiana Ltd offered to buy Zinifex Ltd in an A$11.5bil (US$10.7bil) agreed deal yesterday as they look to diversify to catch a bigger share of surging global minerals demand.
A tie-up of the two miners would create a diversified mining company with operations in Australia and Asia, which would rank as the world’s No. 2 zinc miner and which would have sizeable production of copper, lead, gold and silver.
Zinifex shares rose over 9% after the news, while Oxiana fell over 3%. Some fund managers were less than convinced about the proposed deal, noting that Zinifex shareholders could demand a higher premium.
“This is an opportunity for Oxiana to get bigger and diversify. But that doesn’t make you a better company with good quality assets,” said Peter Chilton, a fund manager with Constellation Capital Management, which manages about A$1.6bil.
Oxiana’s offer values Zinifex at A$12.68 per share, a 14% premium to Zinifex’s Friday’s close. But that is still a far cry from Zinifex’s life high of A$21.60 a share reached in July last year.
The two companies told a joint media conference that integration was their top priority though they would continue to look for more acquisitions outside Australia.
“The companies have agreed that they won’t be out there soliciting bids, that’s not the intention,” said Owen Hegarty, managing director of Oxiana.
“The most important thing for these two companies ... is to get on with this integration and the rest of the market will have to make up their hunch,” he added when asked if he expected a new bidder to emerge.
“The combination makes strong strategic sense,” said Zinifex Chief Executive Andrew Michelmore, who will head up the combined company.
The proposed deal has been rumoured since July last year, when Oxiana chief executive Hegarty said in an interview that Zinifex had quality assets and a takeover would create cost savings.
It comes at a time when big global miners have been making bold takeover bids. BHP Billiton Ltd, the world’s biggest miner, has made an allstock US$147bil takeover offer for rival Rio Tinto Ltd, while Brazil’s Vale has launched a US$90bil offer for Xstrata.
Consolidation in global miners is driven by expectations of continued strong demand for base metals from China and India as the two Asian economies grow rapidly.
Analysts are expecting iron ore and coal prices to rise between 60% to100% when annual contract negotiations conclude in April. – Reuters