Bloomberg reported that MMX Mineracao & Metalicos SA, the miner controlled by Brazil richest man Mr Eike Batista not interested in a deal with Ferrous Resources Ltd after the closely held iron-ore producer proposed a takeover.
Ferrous, backed by billionaire Philip Falcone Harbinger Capital Partners LLC hedge fund in New York proposed on December 19 a USD 2.3 billion takeover of MMX. The companies held several discussions on a merger over the past 18 months.
The Brazilian company made an initial proposal on a possible combination with Ferrous on November 15 2010. Ferrous’ advisers at Deutsche Bank AG and MMX representatives also had talks in August last year.
Two people with knowledge of the negotiations said in October Harbinger held more than 26% of Ferrous as of March. BHP Billiton Ltd the world largest mining company held talks to potentially take over Ferrous last year. MMX in which billionaire Batista controls a 42% stake has a market value of BRL 4.59 billion.
According to the proposal signed by shareholders of Ferrous and addressed to Rio de Janeiro based MMX board ferrous holders would own 53% of the combined company with MMX owners having the rest.
1. MMX Valuation
MMX in a statement sent after the close of trading recently said it’s not interested in a merger with Ferrous. An official at the company wouldn’t confirm if MMX has replied to Ferrous’ proposal.
Ferrous said MMX was worth USD 4.96 billion using a so-called sum-of-the-parts valuation. The merger would create a company which would be listed on the Novo Mercado with an equity value of USD 4.87 billion. Bovespa Novo Mercado is a segment of Brazil’s stock exchange with stricter requirements for disclosure.
Mr Philip Walters an external spokesman for Ferrous in London declined to comment when contacted by Bloomberg News. Mr Lew Phelps a spokesman for Harbinger declined to comment.
While its base case was for an acquisition of MMX through a merger of shares it says “Ferrous is open to considering other mutually beneficial structures including a potential transaction structure in which MMX undertakes a merger of shares with New-Co and MMX is the surviving entity.”
2. CEO Steps Down
Separately, Ferrous said that Chief Executive Officer Mr Mozart Litwinski is stepping down to pursue personal business interests. He was appointed CEO in April 2009.
Belo Horizonte based Ferrous which shelved plans for a USD 400 million London initial public offering in 2010 began iron ore output in March of last year.
The letter shows that a combination of Ferrous and MMX will create one of the leading players in the sea borne iron ore sector. The new entity would have combined resources of 7.1 billion tons of iron ore and exploration potential for a further 3 billion tons. It could produce 59 million tons of the raw materials a year by 2016.
3. Board Approval
The letter shows the proposed purchase of MMX was approved by ferrous board and shareholders on the board representing 72.2% of the stock. The equity value for Ferrous under the plan is USD 1.59 billion based on a sum of the parts valuation of USD 3.45 billion. Ferrous will also contribute USD 1 billion in cash giving it an equity valuation under the offer of USD 2.59 billion.
(Sourced from Bloomberg)
