Xstrata have put themselves back in the WMC ballgame by putting another $1 billion on the table, as Don Boredwalk explains.


The Gnomes of Zugg buckled and added a billion dollars to their offer
for WMC Resources today, with Xstrata doing what it has avoided for
months, admitting that the $6.35 offer for WMC Resources was way too
low.

Now
the $7.20 per share offer, or $8.4 billion in total, is interesting and
competitive. But you do have to wonder about the bone-headedness of the
South Africans who run Xstrata that it took so long for them to realise
this.

After spending several
months imitating David Tweed with a very under-priced offer, Xstrata
has grasped the nettle, but it is still in there with its threats,
warning that the offer will not be extended past the end of February.

Hmmm, we’ll just wait for that to happen, won’t we!

The Xstrata announcement from those folks at its legal advisers, Mallesons, is here and an ABC website report on the announcement here.

WMC
Resources shares of course raced ahead of the $7.20 price to around
$7.55, with a low of $7.51. That compares to a close Tuesday of $7.20.
The news was announced before the market opened Wednesday.

This
offer and price will now go to FIRB which has 30 days at the start to
consider it. That puts a possible decision into early March. So will
Xstrata close its offer before it knows whether it has FIRB approval,
and the approval of the Federal Treasurer and Government?

Don’t
think so. Could we see them inviting the embarrassement of trying to
scoop up control of WMCR, only to find the Feds blackballing the bid?
Don’t think so.

The Xstrata threat to
end the offer on February 28 looks like another ham-fisted attempt from
the South African-British-Swiss company to stampede shareholders and
the Federal Government into meeting it’s timetable and desires.

It
managed to panic the board of MIM Holdings back in 2003. We now all
know about Xstrata’s foibles and arrogance, so this ploy won’t work
again!

Here’s a more substantive reaction from the Fairfax website: Improved WMC bid ‘to hasten sale’

One deal it could flush out is the sale of equity in WMC Resources huge Olympic Dam mining complex in South Australia.

A
sale price that demonstrably showed how much the Xstrata price
undervalued WMCR would be the one thing that would kill the Xstrata
offer.

To be convincing, it would have
to be a big end user or end users or a rival, say Rio or BHP-Billiton,
and would have to be around $4 to $5 billion for up to half of Olympic
Dam.

Finally, Xstrata has known for
weeks its offer was going nowhere. Acceptances were meagre and
shareholders were ignoring the bluster and threats from various
spokesmen.

A filing at the ASX earlier
today said that acceptances of the $7.20 offer totalled just 158,847
shares. Less than 0.02% of WMCR’s issued capital – check it out here.