Monterrico's largest shareholder to reject Zijin offerPublished by MAC on 2007-03-21
Monterrico's largest shareholder to reject Zijin offer
21st March 2007
The Greater Europe Fund, Monterrico Metals' largest shareholder, will reject a takeover offer from a Chinese consortium because the offer undervalues the London-listed miner, the fund's adviser said.
The offer valued the company at around 94.6 million pounds ($186 million) and investors have to accept or reject by March 26. Dublin-listed Greater Europe owns 7.27 percent of Monterrico.
Greater Europe's adviser, German-based Wermuth Asset Management, said its research showed the fair value of Monterrico Metals at between $500 million and $1 billion depending on the valuation model.
That would imply a price per share -- based on around 26.3 million outstanding shares -- of around $19.00 to $38.01 or 9.76 to 19.52 pounds.
Peru-focused copper miner Monterrico Metals Plc agreed in early February to a takeover by a consortium led by Chinese No. 2 gold miner Zijin Mining Group Co. Ltd.
"We believe that Zijin's offer may be at least 2.5 times lower than Monterrico Metals Plc's fair value," Wermuth said. Monterrico's shares have risen to around 3.50 pounds -- the value of the offer -- from below 3.0 pounds in early February when the company detailed a feasibility study on its Rio Blanco copper and molybdenum project in Peru.
Copper is used extensively in the construction, power and auto industries and molybdenum by stainless steel makers.
The Rio Blanco project is seen by analysts as the largest copper project in the world not owned by a major firm.
"Takeover offer and feasibility study serve to support our valuation of around $1 billion for the Rio Blanco copper project in Peru," Numis Securities said in a research note.
"We believe the Zijin offer is opportunistic and represents a significant discount to our valuation of the `world class' Rio Blanco Copper project ... we believe the project should be valued at over $1 billion."
Wermuth said it believed cash-rich companies in the metals sector in the former Soviet Union as well as cash-rich investors could be very well placed to acquire Monterrico and might well find a diversification of their asset base very attractive.
Monterrico is not allowed to seek an alternative bidder, so Wermuth is planning to approach other potential bidders.
"We will discuss the matter as a major shareholder with Kazakhmys, Norilsk Nickel, Uralskaya Gorno-Metallurgicheskaya Kompania (UGMK), Kazzinc, other companies and large investors," Wermuth said.
"Taking into account the current volatile situation in global equity markets around the world there is a risk that some shareholders will accept Zijin's offer, pursuing a short-term goal to fix profit and raise cash."
The Greater Europe Fund has $520 million under management and has returned about 1,500 percent since it was launched in 1998.