- BC Iron Ltd (ASX:BCI) (“BC Iron”) to strengthen its Pilbara iron ore portfolio via recommended off-market takeover offer for Iron Ore Holdings Ltd (ASX: IOH) (“IOH”);
- BC Iron to offer 0.44 new BC Iron shares and A$0.10 in cash for each IOH share held;
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Transaction will create a leading mid-cap iron ore company with:
- An attractive and complementary portfolio of production and development assets in the world’s best iron ore address;
- Combined DSO / CID Ore Reserves of 294.0 Mt at 58.0% Fe, DSO / CID Mineral Resources of 626.5 Mt at 56.8% Fe, and 1.1 Bt at 30.4% Fe of magnetite Mineral Resources1;
- Strong operating cash flows from Nullagine and Iron Valley;
- A strong balance sheet, with unaudited pro forma cash as at 30 June 2014 of A$190 million2 and debt of A$54 million;
- The technical and financial platform to develop the Buckland project;
- A proposed independent infrastructure solution for Buckland and potential third party tonnages, comprising a private haul road and port at Cape Preston East;
- A proven Board and management team with a track record of value creation and returns for shareholders;
- Continued support and commitment of IOH's largest shareholder, ACE; and
- A multi-decade growth path for all shareholders;
- Offer values IOH at A$1.59 per share (based on BC Iron’s 60 day VWAP of A$3.39), a 79% premium to IOH’s 60 day VWAP of A$0.89;
- IOH Board unanimously recommends that IOH shareholders accept the Offer in the absence of a superior proposal;
- IOH major shareholder Australian Capital Equity Pty Ltd (“ACE”), through its 100% owned subsidiary Wroxby Pty Ltd, intends to accept the Offer within 14 business days of the Offer opening, in the absence of a superior proposal;
- Assuming BC Iron acquires 100%, current IOH security holders will own ~36.6% of the combined group, and ACE will own approximately 19.0%;
- Two nominees from IOH, Non-Executive Director, Brian O’Donnell, and Managing Director, Alwyn Vorster, will be invited to join the BC Iron Board as Non-Executive Directors. BC Iron also intends to offer Alwyn Vorster a term advisory contract, with a focus on marketing, funding and business development of the Buckland project;
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The Offer is subject to conditions, which include:
- 90% minimum acceptance;
- Consent of the Pilbara Ports Authority ("PPA") to the change of control in IOH in respect of certain agreements between the Authority and IOH. This requires the PPA to assess the technical and financial capacity of BC Iron, and is considered low risk;
- No Material Adverse Change, Prescribed Occurrence or specified other event occurring in respect of IOH, as set out in the BIA;
- The Platts IODEX 62% Fe CFR China iron ore price (converted from US dollars to Australian dollars using the exchange rate on the relevant day) does not close below A$90/dmt on any 20 consecutive days on which Platts publishes an iron ore assessment;
- The S&P/ASX 200 does not close 10% or more below the closing level on the day of this announcement for 5 or more consecutive trading days; and
- Other standard conditions for a transaction of this type, which are set out in Schedule 2 of the BIA;
- BC Iron expects to announce a fully franked, final dividend for FY14 of A$0.15 per share (final determination to be announced in conjunction with the release of the full year results on
- 27 August 2014). The Record Date will be prior to issue of BC Iron shares to IOH shareholders
Notes:
- Based on BC Iron’s ASX announcement dated 3 March 2014 and IOH’s ASX announcement dated 4 June 2014 (refer to these announcements for further detail). Ore Reserves and Mineral Resources are stated on an attributable basis. CID = Channel Iron Deposit, DSO = Direct Shipping Ore, which is considered to be ore types which do not require significant beneficiation (upgrading) before it is usable feedstock in the sinter or iron making processes.
- Comprised of BC Iron & IOH cash positions as at 30 June 2014, less approximately A$16 million paid to IOH shareholders (i.e. A$0.10 per IOH share) under the Offer, and approximately A$4 million in quantified transaction costs for both companies