Base and precious metals producer Perilya Ltd has received a friendly takeover offer from its majority shareholder, Shenzhen Zhongjin Lingnan Nonfemet Company Ltd (Zhongjin). Chinese-based Zhongjin, which holds a 53.4% stake in the company, has offered to pay Aus$0.35 for each outstanding share in the business that it does not already own.

The offer values Perilya at Aus$269.3 million and represents a 59% premium to the closing price of Perilya shares on August 30, and an 85% premium to the one month volume-weighted average price of Perilya’s shares.

Perilya’s managing director Paul Arndt says the takeover offer from China’s third largest zinc producer provides certainty of timing and value. “Zhongjin’s proposal is priced at a level that represents an opportunity for Perilya shareholders to realize an attractive premium for their investment in a challenging global economic environment epitomized by weak base and precious metals prices and a high Australia dollar against the US dollar.”

Perilya owns the Broken Hill zinc, lead and silver mine in New South Wales, as well as the Cerro de Maimón copper, gold and silver mine in Dominican Republic.

Perilya says its independent directors unanimously support the proposal and it will hold a scheme meeting in December where minority shareholders can vote on the offer. At least 75% of minority shareholders need to approve the bid for the offer to proceed. Approval from Australia’s Foreign Investment Review Board and other regulatory approvals are also required.

“Perilya shareholders, in considering the proposal, should be aware that in the short to mid-term, Perilya will likely have capital requirements to, among other things, ramp up the development at Potosi and introduce a new zinc/cadmium removal circuit at Cerro de Maimon,” Paul Arndt warns.

He says that in the current environment, where both debt and equity markets are depressed, and in the absence of the takeover offer proceeding, Perilya will likely look to raise the necessary funds through an equity offering. “Given that we are seeing equity raisings in the current environment being undertaken at discount to market, any potential raising by Perilya would likely see dilution of the minority shareholders at a discount to market.”

He points out that Zhongjin is committed to continue Perilya’s current operations in Australia and the Dominican Republic and to use its financial strength to underpin the takeover target’s investment and development plans. The Chinese company will not only look to maintain the operations, but also expand them where possible, while retaining all key personnel at both operating locations.

www.perilya.com.au

Resource Center Whitepapers, Videos, Case Studies