Xstrata may face takeover battle in £1.5bn Jubilee bid

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The Independent Online

The mining giant Xstrata launched a A$3.1bn (£1.5bn) offer for Australia's Jubilee Mines yesterday, a move that would boost its nickel operations by 10 per cent, although it could face a takeover battle for the asset. The two companies issued a statement yesterday saying the board of Jubilee had unanimously backed the A$23 per share offer. This marks the Anglo-Swiss group's eighth takeover attempt this year.

It is not the only miner interested in Jubilee, which allowed "several interested parties" to conduct due diligence before recommending Xstrata's bid. Mining bankers said potential counter bids could still emerge, with speculation focusing on possible interest from BHP Billiton, Brazil's CVRD and Norilsk Nickel.

Xstrata has already lost out to Norilsk once this year, on a deal for LionOre Min-ing International, ultimately secured by the Russian group for $5.4bn. Xstrata, which has a market capitalisation of $34.3bn, is confident it can secure the asset after entering into a binding agreement with Jubilee, as investors holding 17.5 per cent of the group's share capital have also pledged to sell their shares to the group.

A spokeswoman for the group said: "Jubilee ran a competitive bidding process. We knew there were others in the data room, but they chose our bid."

The bid, which will be fin-anced through existing credit facilities and cash on hand, was made at a 35 per cent premium to Australian Stock Exchange-listed Jubilee's Friday closing price.

Jubilee's executive chairman Kerry Harmanis said: "This is a great offer to be able to recommend to Jubilee shareholders and an important milestone for Jubilee, representing the culmination of 20 years of exploration success, growth and development."

Xstrata produces 110,000 tonnes of nickel per year, while Jubilee would add a further 12,000. Nickel prices have risen from $25,000 in August to about $30,000 on expectations of increased demand for stainless steel.

Xstrata, run by Mick Davies, is known for its aggressive expansion strategy. Since 1995, it has laun-ched 62 bids worth $41bn, and last year completed one of the largest sector deals on record, when it outmanoeuvred Phelps Dodge to seal the $20.2bn takeover of Falconbridge.