xta announcement to lse

  1. 103 Posts.
    Xstrata plc



    Recommended Acquisition of M.I.M. Holdings Limited

    for US$2,959 million

    and Rights Issue



    7 APRIL 2003

    PART 1 of 5





    SUMMARY



    · Xstrata plc (“Xstrata”) has agreed to acquire, via a scheme of arrangement (the “Scheme”), the entire issued share capital of M.I.M. Holdings Limited (“MIM”) for a cash consideration of A$1.72 per ordinary share or a total acquisition value of US$2,959 million (A$4,932 million), including assumed MIM debt estimated to be US$894 million at Completion (the “Acquisition”). The Acquisition is recommended by the MIM board of directors.

    · The acquisition price represents a premium of 37.6% to the MIM closing price of A$1.25 on 20 November 2002, the day prior to the announcement by Xstrata that the two companies were in early stage discussions, and a 7.5% premium to the MIM closing price of A$1.60 on Friday 4 April 2003.

    · The Acquisition will be part financed through a 3 for 2 rights issue of Convertible Unsecured Loan Stock (“CULS”) at 245 pence per unit to raise £901 million (US$1,406 million) net of expenses (the “Rights Issue”). Each CULS unit will convert into one new Xstrata ordinary share upon the Scheme become effective. The balance of the consideration will be satisfied by bank debt.

    · Glencore, as a 40% shareholder in Xstrata, has confirmed to the Company that it is fully supportive of the Acquisition and has undertaken to vote in favour of it at the EGM. Glencore has also undertaken to ensure the take up of its full entitlement under the Rights Issue. The remainder of the Rights Issue has been fully underwritten by Deutsche Bank and JPMorgan.

    · The transaction is expected to deliver returns to shareholders comfortably in excess of the Group's weighted average cost of capital and to be earnings and cash flow accretive in the first full financial year of the Enlarged Group, even assuming prevailing spot commodity prices and exchange rates remain flat until the end of 2004. In addition, the Acquisition is earnings and cash flow accretive on a proforma basis for the year ended December 2002.

    · Cash cost savings of some US$45 million have been identified for the first full financial year, with additional synergy benefits expected to be confirmed through the integration process.

    · MIM is a large, cost competitive mining, smelting and refining company incorporated in Australia with a primary listing on the Australian Stock Exchange. MIM’s major products include copper, thermal and metallurgical (coking) coal, gold, zinc, lead and silver.

    · The Acquisition will provide Xstrata with meaningful entry points into two major global commodity markets (copper and metallurgical coal), while significantly adding to Xstrata’s existing strong global positions in export thermal coal and zinc. The key coal and copper assets of MIM comprise good quality operations, which are competitively positioned within their respective industries and which complement Xstrata’s existing cash generative portfolio. The scale of the acquired businesses provides the critical mass to launch Xstrata on the next stage of its growth and development as a global diversified metals and mining business.

    · The Enlarged Group will benefit from increased diversification by geography, commodity and customer, as well as from increased stability and security of earnings.

    · On a pro forma basis, the Enlarged Group is expected to have an estimated net debt to equity ratio of 45%, based on estimated net debt of some US$2.4 billion on completion. Following discussions with rating agencies, Xstrata is confident that the Enlarged Group will secure an investment grade rating.

    · Completion is conditional upon, among other things, the approval of Xstrata shareholders, the approval of MIM shareholders, the receipt of certain regulatory approvals and clearances, including from the Australian Government, and the approval of the Queensland Supreme Court (the “Court”). Completion is expected to occur around 20 June 2003.



    Mick Davis, Chief Executive of Xstrata, said:

 
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