Xstrata set to deliver knockout WMC bid

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The Independent Online
XSTRATA, THE London-listed mining group, yesterday raised its offer for Australia's WMC by 13 per cent to A$8.4bn (pounds 3.5bn), a level seen as a likely knockout figure.

Although there was feverish speculation yesterday that the move would flush out a counter-bidder, centring on a possible offer from Rio Tinto, analysts said this was unlikely.

Xstrata had offered A$6.35 a share in cash for WMC in October last year, which was rejected. WMC had then commissioned independent consultants to value the company, which produced a range of at A$7.17 to A$8.24 a share.

The new offer from Xstrata was pitched within that range, at A$7.20 a share, also in cash. In the absence of another bidder emerging, analysts said it would be difficult for WMC to rebuff the money now on the table. A detailed response is expected from the Australian group today.

Nick Hatch, of Investec Securities, said: "Maybe Xstrata has been a bit too cute in pitching the offer just 3 cents within the range. But it would be very hard for WMC not to at least talk to Xstrata now."

A number of companies have linked with a possible counter-bid, including London's Anglo American, BHP Billiton and Rio Tinto. Many speculators were betting on this yesterday with WMC's share price closing in Australia at A$7.65, well above Xstrata's offer. However, the bid price now is seen as likely to put off any company thinking of making its own offer, analysts said.

Xstrata said its new offer was "final" unless it is trumped by another party. It said a merger with WMC would create "a powerful global mining entity".

Mick Davis, Xstrata's chief executive, said: "This is a premium offer at the top of the cycle which provides WMC shareholders with an unprecedented opportunity to realise full value for their shares, including benefits from synergies Xstrata will gain from combining with WMC."

The deal will add uranium and nickel to Xstrata's portfolio and double its copper production. The transaction will however need to be approved by the Australian government, which will assess whether it damages the national interest.

WMC shares traded at less than A$5 a share before Xstrata first proposed to buy it in late October. Xstrata is already Australia's largest domestic copper miner and a world force in lead and zinc after acquiring Australian miner MIM in 2003 for A$2.1bn. It also mines coal in Australia and South Africa.