Xstrata is offering A$23 per share which represents a premium of 36% to the 30-day volume weighted average price of Jubilee, a 35% premium to the closing price on October 26 and a 25% premium to the stock's all-time high. But after the deal with Xstrata was announced, enthusiastic Jubilee shareholders pushed the share price up by 40% to close at A$23.95 on October 29.
Market commentators say Jubilee shareholders are hopeful that a higher, competing bid for the company will be tabled.
The takeover has been unanimously recommended by the Jubilee board. Xstrata has already secured 17.5% of the company's shares through a deal with Jubilee's executive chairman, Kerry Harmanis, and some other Xstrata directors and senior managers. The Xstrata offer is contingent upon cornering 90% of Jubilee shares outstanding.
With 17.5% of the company already tied up by Xstrata, it seems unlikely that another party will now come to the table.
In a press briefing after the deal was announced, Harmanis said the board had scoped out the market for other buyers after receiving expressions of interest for the business. He did not mention the names of any other interested parties but was categorical that he believed the Xstrata bid was in the best interests of Jubilee shareholders and suggested shareholders tender their shares to Xstrata.
Jubilee is being represented by Morgan Stanley and Cochrane Lishman, while Xstrata is represented by Macquarie Bank. Malleson Stephens Jacques and Freshfields are providing legal advice.
Xstrata has received informal approval for the deal under Australian competition laws. The deal is subject to approval by AustraliaÆs Foreign Investment Review Board.
Jubilee is an Australian nickel mining company with a focus on high-grade nickel sulphides. It owns and operates the Cosmos Nickel Project and will also be proceeding with a new project, the Sinclair Nickel Project. Both mines are in Western Australia.
For the 12 months ending June 30, Jubilee had a net profit of A$173 million. As of June 30, the book value of its assets was A$492 million. At A$3.1 billion, Xstrata is paying 17.9 times earnings and 6.3 times asset value.
Toronto-headquartered Xstrata Nickel is the worldÆs fourth largest nickel producer, managing mines with an aggregate capacity in excess of 110,000 tonnes of refined nickel. It is part of the Switzerland-based Xstrata Group, a diversified mining group which is listed on the London and Swiss Stock Exchanges.
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