Xstrata goes hostile in £3.1bn WMC bid

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The Independent Online

Xstrata, the ambitious mining group, yesterday went hostile with its £3.1bn offer for Australia's WMC.

Xstrata, the ambitious mining group, yesterday went hostile with its £3.1bn offer for Australia's WMC.

The cash offer from the London-listed company, which was unchanged from an approach made last month, was pitched at 6.35 Australian dollars (£2.70) a share, valuing the group at A$7.4bn. Xstrata has decided to put the offer - again rejected by WMC's management yesterday - direct to the the Australian company's shareholders.

Though Xstrata's announcement was made after the markets closed in Australia, it was well below WMC's closing price of $7.04. WMC shares traded as high as A$7.39 last week on speculation of a higher offer from Xstrata or another predator.

Nick Hatch, of Investec Securities in London, said: "Why wait for A$6.35 when you can get more than A$7 in the market? Given this price difference Xstrata's offer will clearly not succeed but is likely to elicit selling. This may force the share price down to a level Xstrata is prepared to pay in a raised offer." He suggested Xstrata would not need to raise its offer much to convince WMC's board to support it.

Mick Davies, the chief executive of Xstrata, said the offer was a "full price" for the company, but when questioned declined to say it was a "final" offer. "I can state categorically we have no intention of raising the price, but clearly I reserve my rights in this respect," he said.

Xstrata listed in 2002 and doubled its size last year through the £1.65bn acquisition of MIM, an Australian coal miner. It now has a market value of £5.8bn.

WMC said: "We reiterate that the offer fails to recognise the current and prospective value of WMC's assets and the strategic benefits to Xstrata or other potential acquirers."

It said the offer did not fully value the development potential of its assets, in particular Olympic Dam in south Australia, one of the world's largest copper mines. Xstrata has questioned the ability of WMC to develop the mine and pointed out that, though it had not raised its offer since the initial approach, the offer still represented a 29 per cent premium to the WMC share price on the day before Xstrata's interest emerged. The predator hopes WMC will now be forced to try to prove it is worth more.

Mr Davies said: "I'm just convinced that the price that we've offered represents a full value for the company, and the shareholders should have the chance of evaluating that price against the advice they are going to receive from the independent expert." He said there was "no great strategy behind the timing" of the move, as it was simply dictated by having to "bed down" the MIM deal first.

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