Perilya shares up, merger offer rejected
Monday December 15, 2008, 4:54 pm
Shares in takeover target Perilya Ltd jumped on Monday after its board advised shareholders to reject a hostile $31.4 million all-scrip bid by fellow lead and zinc miner CBH Resources Ltd.
Shares in Perilya closed up four cents, or 25.81 per cent, at 19.5 cents while CBH's shares were up 0.1 of a cent, or 2.7 per cent, at 3.8 cents.
Perilya said a merger with CBH was unattractive because it had too much debt.
CBH had debt of about $190 million including convertible bonds at the end of September.
Perilya said CBH's offer was at a significant discount to the funds it will gain through a proposed placement to China's third largest zinc producer, Zhongjin Lingnan Nonfemet Co. Ltd (Zhongjin).
If approved by Perilya shareholders at a general meeting in February, Zhongjin will take a 50.1 per cent stake in the Perth-headquartered miner for $45.5 million in cash.
"By contrast, the offer by CBH at current share prices is at a significant discount to the proposed Zhongjin placement, and does not deliver immediate or certain cash to the company," Perilya chairman Patrick O'Connor said on Monday.
"Given the current debt position of CBH, a merger with CBH would move Perilya into a net debt position with significant interest payments, during a time of depressed metal prices and volatile markets."
Perilya managing director Paul Arndt the merger could save CBH around $70 million but it had failed to demonstrate how such a tie-up would benefit Perilya shareholders.
"Under CBH's proposed merger, Perilya shareholders would be giving away half of their company while contributing more than 60 per cent of the merged entity's metal production," Mr Arndt said.
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