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| Subject: MIM surging as Xstrata slips | |
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Author: 17-January-2003 |
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Date Posted: 10:09:21 01/17/03 Fri MIM surging as Xstrata slips 17-January-2003 MIM Holdings (MIM) shares have jumped again this morning amid a surge of speculation that a cash and scrip bid from Xstrata is imminent. MIM advanced yesterday after a visit to Australia by Xstrata chief executive Mick Davis sparked talk around dealing desks. Davis, a former Billiton chief financial officer, has reportedly been sounding out key institutional shareholders in Sydney about a possible bid. An MIM spokesman would not confirm whether a meeting had been arranged between the copper and coal miner and Davis. The spokesman said MIM had nothing to add to its November 21 statement when it admitted it was in talks with Xstrata. However the AFR reported an institutional investor saying it was now only a matter of time before Xstrata proceeded with a proposal which was likely to involve a mixture of cash and shares. Davis apparently told the institutional investor that a merger with MIM would be value and earnings-accretive for Xstrata. The increase in value would come from a re-rating of the stock as it diversifies its earnings away from South Africa towards Australia. Xstrata is trading on the LSE at less than 8.5 times next year’s earnings compared with MIM on a multiple of 13 times. The AFR also reported that speculation around dealing desks is for Xstrata to offer MIM shareholders $1 cash and 1 Xstrata share for every 20 MIM share. Yesterday, this valued MIM at $1.86 per share but a 6.5% fall in Xstrata on the London Stock Exchange last night means this would be now worth $1.80. A common trade for hedge funds seen in previous takeovers such as Newmont-Normandy is to sell the bidder’s stock and buy the target - in this case selling Xstrata and buying MIM. Another source of weakness in Xstrata shares overnight could have been a downgrade from CSFB. The broker cut its rating to Neutral from Outperform, citing currency exposure and heightened transaction risk. At 1024 AEST MIM Holdings shares were trading 2c higher at $1.62 after initially jumping up to $1.65. [ Next Thread | Previous Thread | Next Message | Previous Message ] |