Takeover battle heats up

THE battle for control of Sphere Minerals is heating up, with Sin-Tang Development getting the all clear to acquire up to 22.9% in the iron ore group, while Xstrata grows its holdings as the clock ticks down to Friday.

Sin-Tang and its associates already hold 13.5% of Sphere and approval from the Foreign Investment Review Board allows it to acquire up to 19.9%, with a further 3% subject to creep provisions of the Corporations Act.
Today, Genesis Investment Management has instructed its custodian to tender acceptance instructions for its entire 7.98% holding in Sphere to Xstrata.
Xstrata needs 50% of Sphere for its bid, which closes on Friday, to be successful.
Current acceptances stand at 15.11%, with institutional acceptance facility (IAF) acceptances at 23.46%, bringing the total tally to 46.55%.
It had already secured acceptances from Acorn Capital, one of Sphere’s largest shareholders, for its 11.59% stake.
Last week Sin-Tang tried to trump Xstrata by offering a financing proposal to develop Sphere’s Askaf property in Mauritania.
It comprised a preliminary and conditional funding arrangement, including a letter of comfort from the Metallurgical Corporation of China to help Sphere secure export buyer’s credit from Chinese banks for 70% of the engineering, procurement and construction contract price in the event MCC was awarded the contract, and a letter of intention of credit from the Banks of Communications Co for $350 million in funding to develop Askaf.
It also included a renounceable pro-rate entitlement issue by Sphere of 34.3 million shares at $3.25 per share to raise $11 million that would be underwritten by Sin-Tang.
A war of words followed, with Sphere directors urging its shareholders to accept the “superior” Xstrata bid in preference to the Sin-Tang offer, which it described as uncertain, highly conditional, inferior and potentially dilutive to existing holders.
This week the Swiss miner has also stepped up its marketing efforts, taking out full-page colour advertisements in national newspapers across the country, urging Sphere shareholders to accept its bid.
Late yesterday, Sin-Tang said it believed Sphere’s assets were worth substantially more than Xstrata’s offer of $A3 per share, which values Sphere at around $514 million.
It independently valued Sphere at $4.51 per share and said the deal was not excessively dilutive to Sphere shareholders.
“Sphere shareholders would have the ability to participate and maintain their shareholding in a renounceable pro rata rights issue and the proposal will accommodate Sphere shareholders who would like to increase their shareholding in Sphere through a top-up facility,” the Sin-Tang statement said.
“In the event Sphere shareholders do not wish to participate, dilution would only be 16.5%.”
It also said there would be no offtake component required under the equity underwriting proposal.
Sin-Tang’s offer for underwriting the equity funding remains open until November 19.
Shares in Sphere were up 1.02% in morning trade to $2.98.

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