WMC seeks white knight to see off Xstrata

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The Independent Online
WMC BEGAN an urgent search for a better takeover offer yesterday after the Australian miner refused to back an improved bid from the London- listed group Xstrata.

However, analysts said another suitor was unlikely to emerge, meaning that WMC may eventually have to recommend the cash bid tabled by Xstrata on Wednesday.

If there is another party waiting to pounce on WMC, it is expected to wait until the Australian government decides on whether there are any "national interest" grounds to block the takeover. An answer from the government is expected in a couple of weeks and hinges on its view on WMC's sensitive uranium assets.

Xstrata first approached WMC in October with an offer of A$6.35 (pounds 2.59) a share, which was rejected. The Australian group then commissioned independent experts to provide a valuation of WMC, which produced a range of A$7.17 to A$8.24 a share.

The WMC board noted yesterday that the latest offer was only just within the independent valuation range but stopped short of actually turning down the bid. "WMC directors have declined to endorse the offer and will now consider all options to secure the best outcome for WMC shareholders," the company said. Marc Gonsalves, a spokesman for Xstrata, said: "WMC has not rejected our offer and has not said that it is too low. They have simply said they would like more - and have stalled for time."

Since Xstrata's interest emerged, WMC has invited a number of other mining groups to visit its key Olympic Dam asset in the hope of drumming up a counter offer. Those efforts will now be redoubled. WMC said: "In light of Xstrata's revised offer, discussions [with other parties] will now be expanded to encompass potential value-adding proposals around the whole company."

Nick Hatch, at Investec Securities, said given that the Xstrata offer was within the independent valuation range, it would be difficult for WMC to ultimately reject the bid, in the absence of a better counter bid.

The Xstrata offer is dependent on acceptances from at least 90 per cent of WMC's shareholders - a level that would probably need a board recommendation. Analysts believe that, even if it fails to win an endorsement, Xstrata would probably drop this condition, as long as it could win a majority. Xstrata could then return at a lower point in the commodities cycle to mop up the minority shareholders.