MELBOURNE – The second-largest investor in Australia's Mineral Deposits said it would not accept a takeover bid by Eramet SA, as Mineral Deposits' shares surged, signalling investors expect the French miner to make a higher offer.
Eramet made an all-cash takeover bid for its joint venture partner in a mine in Senegal and a processing plant in Norway, at $1.46 a share in late April, valuing the company at about A$288-million ($218-million).
The French company pitched its initial offer at a 26% premium to the target's most recent close, but the shares have since rocketed well above that, closing at A$1.76 on Friday.
"We consider all bids. At this stage we are not inclined to accept Eramet's current bid of A$1.46 per share," said Simon Mawhinney, chief investment officer at Allan Gray Australia, the miner's second-largest shareholder with a 13.4% stake.
Eramet, capitalised at 3.8 billion euros ($4.47 billion), had said the deal would enable consolidation of the TiZir joint venture, in which each company has a 50% stake. TiZir operates a titanium dioxide and zircon business in Senegal and Norway that predominantly supplies the paint industry.
The deadline for Eramet to extend or raise its bid for the Australian mineral sands producer looms on June 13, a week before the offer expires.
Eramet declined to comment.
The Mineral Deposits board urged shareholders to reject the offer, saying it was "grossly inadequate" and undervalued the outlook for titanium dioxide and for the operation.
Mineral Deposits' independent expert Grant Samuel has said the target company is worth A$2.04 to A$2.52 per share.
"We have full confidence in the board, in the way they are conducting the process, and we have a long term view on value," said Gabriel Radzyminski at Sandon Capital, which also owns shares in Mineral Deposits.
"Our estimate of value, it is fair to say, is within the range of the independent expert's views."
Macquarie Group, which is advising Eramet, has been meeting investors to learn what price they will accept.
"Eramet has the view that the independent report has used optimistic price forecasts and operational forecasts in arriving at the rates," a source with direct knowledge of the matter said.
Eramet has said it has a relevant interest in Mineral Deposits of 13.3%, made up of an 8% direct stake and pre-bid acceptances from investors who own 5.3% of the company's shares.