Norilsk Nickel, the Russian mining giant, staged one of the biggest takeover of West European listed companies when it upped Xstrata’s offer for all cash takeover bid of LionOre International on Thursday.
In a surprise bid, Norilsk said it would offer shareholders of LionOre US $ 21.50 per share or US $5.1 billion against Xstrata’s offer of US $ 4 billion that was announced in March.
The entry of the Russians into the bid raised speculation that the “scramble for the nickel rich LionOre is far from over” as Xstrata, which has up to Tuesday to respond or comment, is expected to sweeten its offer but the real challenge may come from BHP Billiton Ltd , the world’s biggest mining house.
“I think the fight for LionOre International is far from over. We are likely to see more bids coming on board. And that would be good for the shareholders,” a leading resource analyst, Leutlwetse Tumelo of Capital Securities, said.
He added: “They (Xstrata) may come up with a counter bid on the eleventh minute, say Monday or late Tuesday, to try to meet their deadline. The thing is, with this kind of deal everyone is keeping his cards to his chest.”
“Judging by the history with Falconbridge, I would expect them to come back,” Michael Cavanaugh, a metal analyst with UralSib Bank in Moscow was quoted as saying. He added,”There is room for Xstrata to improve their offer.”
Xstrata took over Falconbridge in a US $24.8 billion deal in September when it outbid the Phelps Dodge Corp.
The latest announcement of Norilsk’s offer led to share price spike as it jumped 4.85 Canadian dollars or 25.3 percent to 23.75 Canadian dollars. On the Botswana Stock Exchange, it moved up 170 thebe over the week to 10300 thebe by Thursday’s close.
LionOre, which is headed by Colin Steyn, is attractive because of its rich nickel resources at Tati Nickel mine ÔÇösome 45 kilometres south-east of Francistown and its reserves in South Africa and Australia.
LionOre, the tenth biggest nickel mining company in the world, is also strengthened by its trail-blazing technology, Activox, which uses a leaching technique that eliminates the traditional and costly smelting process.
The bidding companies are interested in both the company’s resources and acquiring the Activox technology, which is tightly held under LionOre International patent rights.
According to international media reports, Xstrata was unable to comment on the latest moves though it expressed interest in acquiring Activox technology still under construction in Botswana and is due for completion in 2009.
Norilsk, the sixth biggest mining company in the world, is named after the town of Norilsk, located 300 kilometers north of the Arctic Circle, and began life as a Soviet forced labour camp under the rule of Stalin in 1935. The company is one of the very few giant Russian operations which do not have direct government control following its privatization in 1997. It has a market value of US $ 36 billion.
Norilsk is involved in the production of a number of minerals, such as nickel, palladium, platinum and copper. It also owns cobalt, rhodium, silver gold, tellurium, selenium, iridium and ruthenium mines.
The move comes at a time when the multi-listed LionOre is in the process of delisting in some of the major exchanges in preparation for the takeover.