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takeover - best way to play it

  1. munch

    3,567 Posts.

    According to street talk in todays AFR I would think the best way to play the MIM takeover is wait for a bid to emerge (hopefully a low bid around $1.60) and then buy in hoping for a rival.

    Any thoughts?

    MIM's price tag

    Just what is the consensus valuation range for MIM among analysts? That issue is becoming an increasingly fractious one as the Brisbane-based miner, while negotiating a merger with Xstrata, continues to sprout numbers in the public domain.

    Past resource transactions have been struck at close to net present value so it's an important debate.

    Around the time of the interim results, MIM managing director Vince Gauci was sprouting a $1.70 to $1.80 a share range, and later was reported as having upped this by 10¢, pushing the top end to $1.90.

    Yet this seems to contradict an email sent by the company to analysts, which Street talk has obtained.

    Delivered close to the February 17 interim result, the email details 12 NPV figures that produce an average of $1.65, which a cynic might suggest is what Xstrata wants to pay. It includes an outlier of $2.37, which, if removed, sees the average fall to $1.58.

    Having come this far, though, it's hard to turn back. It is feasible, despite the argy-bargy, that Xstrata will table an all-cash bid closer to $1.80 - based on the rationale that MIM doesn't like its scrip and Gauci is convinced his company is worth at least $1.70.

    Several fund managers reported last year having been sounded out on $1 a share cash plus one Xstrata share for every 20 MIM shares. Yet current thinking is that it would have to offer all cash and raise funds on the London Stock Exchange.

    Hedge funds will have a role to play because they control a considerable chunk of the MIM share register and they want a deal.

    On Friday, Street talk rang a few and the consensus seemed to be they would deliver the company to a buyer for anywhere above $1.50.

    The risks on the downside are substantial. Before the talks were aired, MIM was trading at $1 to $1.10 and its growth options, including the open pit at Mt Isa and the Albion zinc processing technology, were known to all and sundry.

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