xstrata's wmc bid approved

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    By Simon Casey

    London - Xstrata has won approval from its shareholders for a A$7.4 billion (R33.9 billion) hostile takeover bid for Australia's WMC Resources.

    Glencore International, the owner of 40 percent of Xstrata, was among the investors that backed the bid at a meeting yesterday in Zug, Switzerland.

    Xstrata, the largest exporter of coal burned by power plants, is offering A$6.35 a share, less than yesterday's close of A$7.25. Melbourne-based WMC, the world's fifth-largest nickel producer, has rejected the bid as too low.

    "The proposed acquisition of WMC will launch Xstrata on the next stage of its growth and development," Xstrata chairman Willy Strothotte said at the meeting.

    Mick Davis, Xstrata's chief executive, is targeting WMC to boost metal output after prices for copper, nickel and cobalt surged in the past two years.

    Buying WMC would make Xstrata the world's sixth-largest copper producer and allow it to enter the market for nickel, which is used to make stainless steel.

    WMC shares have climbed 41 percent on the Australian Stock Exchange since October 28, when the bid was first reported. The shares closed at $7.32 on Tuesday.

    Xstrata shares have dropped 1.5 percent in London following the bid, cutting the company's market value to £5.6 billion (R63.3 billion).

    WMC owns assets that Xstrata could expand, including the Olympic Dam mine, site of the world's biggest uranium deposit and fourth-largest copper deposit.

    Alex Wood, an analyst at London-based brokerage firm Williams de Broe, said in an interview on Wednesday that Xstrata needed to grow to keep up with Melbourne-based BHP Billiton and London-based Anglo American, the world's largest mining companies.


    "They have a very strong project pipeline. Xstrata just doesn't," Wood said.

    WMC's fourth-quarter copper output rose 81 percent from a year earlier, the company said in a statement to the Sydney bourse.
    WMC said it had met its annual copper output forecast and beat its nickel estimate.

    Copper prices rose 37 percent last year as China and the US used more metal in electrical wiring. Mining companies including BHP Billiton and Rio Tinto Group have raised copper output to meet growing demand.

    Nickel prices have doubled in the past two years because of surging purchases of stainless steel, used to make household appliances.

    In 2003 Xstrata bought the Mt Isa copper mine in Australia through its $2.3 billion (R13.7 billion) acquisition of MIM Holdings.

    WMC told investors that Xstrata's bid undervalued its assets and a potential $4 billion expansion of Olympic Dam. WMC said on January 4 that its shares were worth as much as A$8.24, or 30 percent more than the Xstrata bid, citing an audit it had commissioned from corporate adviser Grant Samuel & Associates.

    "A counterbid remains a distinct possibility, given the upside and opportunity we see in the key copper asset," John Mackinnon, an analyst at Deutsche Bank in London, said in a report on January 10.

    Xstrata is being advised by JP Morgan Chase & Company, Gresham Advisory Partners and Mallesons Stephen Jacques. Citigroup and UBS are advising WMC.
 
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