Business Irish

Sunday 31 August 2014

Kenmare Resources rejects Iluka takeover bid

Sarah Stack

Published 26/06/2014 | 12:19

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Michael Carvill, managing director of Kenmare Resources
Michael Carvill, managing director of Kenmare Resources

DUBLIN-listed Kenmare Resources has rejected a takeover bid from Australian rival Iluka Resources.

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Shares in mining company soared by 20pc this morning, up to 17.4 cents, as it confirmed it had has received an approach from Iluka regarding a possible offer.

Kenmare said the proposal received was based on a share for share exchange, with no cash component, with Kenmare shareholders receiving 0.036 new Iluka shares for each Kenmare share they own.

“The board of Kenmare has rejected Iluka's proposal, which it believes does not recognise the value inherent in Moma as a long-life, low-cost asset,” it added.

“M&G Investment Management, which manages funds owning in aggregate 19.05 per cent of Kenmare, has confirmed that it supports the board's decision.”

The company is valued at close to €500m.

Australian mineral sands miner Iluka , a A$3.5 billion ($3.29 billion) company, is the world's top producer of zircon, which is used in ceramic tiles.

"Iluka confirms that it has made an approach to Kenmare in relation to a potential combination, which may be implemented by way of an offer for Kenmare," Iluka said in a statement to the Australian stock exchange.

The move on Kenmare, whose main asset is the Moma titanium minerals mine in Mozambique, fits with Iluka Chief Executive David Robb's strategy to use the company's strong balance sheet to expand by hunting for bargains amid the market slump.

"It makes some sense for the industry to be consolidated further given the tough marketing conditions," said Lawrence Grech, senior resources analyst at PhillipCapital.

He said if a deal goes ahead it should probably be as a nil-premium merger or only a small premium, given that there would only be modest synergies in putting the two companies together, while there would be longer term benefits for the market

Iluka shares jumped 1.5pc after it confirmed the media speculation, in a broader market that was up 1 percent.

Kenmare said approach from Iluka was preliminary in nature and was subject to various pre-conditions, including due diligence, and there can be no certainty that an offer will ultimately be forthcoming or on the terms on which any offer might be made.

“Kenmare shareholders will be kept informed of relevant developments and in the meantime are advised to take no action,” it added.

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