Yesterday the Indonesian coal miner informed the Australian Securities Exchange that it had cornered 51.34% of HeraldÆs shares. The value of the controlling stake is A$295 million. The announcement ends a takeover battle that has been waging since December last year when Bumi first made a move to buy Herald, offering A$2.25 per share. At the time, BumiÆs move was described by HeraldÆs board of directors as ôhostile and unsolicitedö. Bumi has been advised by Credit Suisse on the transaction.
One month later, HeraldÆs board endorsed BumiÆs bid, but then HeraldÆs adviser, Euroz Securities, was able to attract a competing bid from a consortium of IndonesiaÆs Antam and ChinaÆs Shenzhen Zhongjin Lingnan Nonfemet. On January 30, the Antam consortium offered A$2.50 per share for Herald. The consortium, which is advised by Macquarie Capital Advisers, is now entitled to an A$5 million break fee from Herald.
Since February the two bidders have been engaged in a closely contested battle for Herald, which is listed in Australia but has its main asset in Indonesia û the Dairi lead/zinc mining project in north Sumatra. The project has been awaiting forestry approvals for over two years and thus has not commenced development.
Antam is a mining firm, 65%-owned by the Indonesian government, and a partner with Herald in the Dairi project as it holds a direct 20% stake in the mine. Zhongjin is a Chinese state-owned enterprise, 38%-owned by the government. It is engaged in mining and processing of zinc, lead and other non-ferrous metals.
Both bidders have been cautious with regard to their recent bid increments, each time exceeding the otherÆs offer by only five Australian cents as they neared the ceiling for what they were willing to shell out for control of the Australian miner. Indeed, on June 29, HeraldÆs board told shareholders that it was unable to recommend one bid over the other as both suitors were offering A$2.80 per share. The board suggested shareholders decide themselves which party to tender to, while HeraldÆs directors chose to tender their holdings to Antam.
But Bumi broke the impasse on July 2 by increasing its offer to A$2.85 per share. The price represents a 102% premium to Herald's three-month volume-weighted average price on the ASX for the period prior to December 12, the day Bumi tabled its original bid.
"We believe that any shareholders remaining in Herald after the close of the Calipso (Bumi's investment vehicle) offer would be confronted with an uncertain future in terms of the market price and liquidity of their Herald shares," says Herald chairman Terrence Allen in an ASX filing. Bumi's bid closes today. Antam has indicated it will tender its 20% shareholding in Herald to Bumi.
Herald last traded at A$2.83 a share. Bumi opened at Rp6,900 ($0.75) yesterday and lost 7% during the course of the day to close at Rp6,400.
Bumi initially tied up a debt facility of $270 million to cover its bid. The facility was with a consortium of lenders led by Credit Suisse and including IndiaÆs ICICI Bank, the Industrial and Commercial Bank of China (ICBC) and two German banks. On June 24, Bumi increased the limit on the facility by another $85 million to $355 million, reflecting the increased funding requirement to cover the enhanced bid. The rest of the financing will come from Bumi's cash reserves and the liquidation of some of its other investments, which were last valued at $121 million.