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Noranda fund snubs Xstrata bid
Tue, 07 Feb, 2012
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Noranda fund snubs Xstrata bid
Thu, 2 Sep 2010, 07:11:00
<b>Xstrata Zinc's</b> proposed acquisition of Toronto-listed Noranda Income Fund has fallen through after the pair were unable to agree a price. Madrid-based Xstrata Zinc had increased its offer for the fund to C$3.90 for every priority unit, worth $146.3m (£90.2m), up from an initial offer of $3.40, or $127.5m. That's a 53% premium to the closing price the day before the original bid. But the fund, which owns the CEZinc processing facility in Québec, rejected the takeover "having taken into account recent market trading activity in the fund's priority units". They are currently trading above $4. Anglo-Swiss miner Xstrata owns an effective 25% of the fund, manages its sole operating asset, and also supplies CEZinc with its annual requirement of zinc concentrate through a contract which will expire in May 2017. "Our proposal was based on our ability to consolidate the CEZinc refinery into Xstrata Zinc's global operations to secure its long-term future and on our considered view, as the operators and managers of the asset, of its prospects on a standalone basis," said Xstrata Zinc boss Santiago Zaldumbide. In a swipe at Noranda's management, Zaldumbide pointed out that the trust will lose its tax-free status from 1 January 2011 and must refinance its debts of C$193m later this year. He added that CEZinc faces competition with low-cost processing capacity in China and will need to source zinc concentrates when the current supply contract expires. Then, existing Canadian and Western world sources are likely to be constrained and Chinese demand is expected to have grown further. "In the light of these uncertainties, Xstrata's proposal would have provided unitholders with the certainty of cash."
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