Bumi yesterday improved its December offer for Herald Resources by 13% to A$2.55 per share. ThatÆs five Australian cents more than the competing offer made in January by Antam and Shenzhen Zhongjin Lingnan Nonfemet. Bumi has also waived all conditions to the bid except the 50.1% minimum acceptance condition. Since it made its original offer on December 12, Bumi has secured 19.6% of HeraldÆs shares so it now needs another 30.5%.
Bumi said its offer will expire on June 4, which is one day before the Antam-Zhongjin offer is due to expire.
BumiÆs offer represents an 81% premium to the three-month volume weighted average price prior to its initial bid. HeraldÆs share price has improved greatly this year and the company last traded at A$2.86, making it questionable whether Bumi's improved offer will be good enough to reach its target shareholding. Bumi is being advised by Credit Suisse.
HeraldÆs main asset is the Dairi zinc/lead mining project, which has a forecast capacity of 220,000 tonnes of zinc and 100,000 tonnes of lead. However, key approvals for the project have been delayed for two years.
BumiÆs original offer was unsolicited and described by Herald management as hostile. In its initial bid Bumi had suggested its experience in Indonesia's mining sector meant it was better placed than Herald management to secure these approvals, but Herald refuted this.
Subsequently, on January 23, Herald changed its stance and suggested shareholders accept BumiÆs A$2.25 per share offer, while cautioning shareholders not to tender their shares until the end of the tender offer period as it was trying to bring a competing bidder to the table. Herald is being advised by Euroz Securities.
HeraldÆs directors were successful in getting the Antam-Zhongjin consortium to offer A$505 million for the company, trumping BumiÆs bid by 11%. Antam and Zhongjin are being advised by Macquarie.
Antam is 65%-owned by the Government of Indonesia with the rest of the shares widely dispersed. It already owns 20% of HeraldÆs Dairi project in Sumatra in Indonesia via a joint venture with Herald. When it announced its bid, Antam had accumulated a 10.7% direct interest in Herald.
Zhongjin is a Chinese state-owned enterprise. The Antam-Zhongjin offer is being made through a special purpose vehicle. Antam owns 40% of the SPV and Zhongjin 60%. The Antam-Zhongjin offer is also subject to a minimum acceptance level of 50.1%.
Credit Suisse is putting its balance sheet to work for Bumi with whom it has a long history of doing deals. Bumi informed the Australia Stock Exchange on April 2 that its first bid was part-financed by a debt facility of $270 million tied up with a consortium of lenders led by Credit Suisse and which includes IndiaÆs ICICI Bank and the Industrial and Commercial Bank of China as well as two German banks. Bumi also said that Credit Suisse had agreed to underwrite a further debt facility of $105 million, leading to speculation that it was considering enhancing its bid. The balance of the finance will come from Bumi's cash reserves and the liquidation of some of its investments.
The competition for Herald underscores how hungry emerging Asian economies are for natural resources. And with banks in the region continuing to extend financing to such deals, these acquisitions seem set to continue.
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