Perilya and CBH Merge, ASX Up 1.2%

123jump.com Staff
26 Mar, 2008
New York City

Australian stocks rallied as prices of base and precious metals and oil jumped in the international markets. ASX 200 gained 1.2% to 5,381.40. Perilya and CBH agreed to merge and create ninth-largest zinc manufacturer. Three CBH shares will be exchanged for one Perilya shares and a stake in Kimberly Metals. IMF Australia plans to finance litigation against Centro, MFS and Allco. Xstrata in London trading fell 12% after Vale said that it is no longer negotiating with the company.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index advanced 1.2% on a rally in resource stocks.[/R]

Market Sentiments

ASX 200 index gained 1.2% or 63 to close at 5,381.40.

Market Driver

Rio Tinto chief executive, Tom Albanese told journalist today that the issue of price was the sole reason behind their rebuff of BHP Billiton''s $147 billion hostile takeover offer bid. Albanese has consistently argued that BHP''s offer of 3.4 of its shares for every Rio share belittled his company''s actual value.

""In these strong market and business conditions, it is not difficult to see different values in these mergers,"" Albanese told the reporters during a business lunch.

""We rejected BHP''s proposal strictly on the basis of value,"" Albanese said, adding that at some point miners run the risk of losing efficiency gains if they become too large. Albanese also said the merger of the two mining giants would not help expansion as his company already had a global reach.

BHP chief executive Marius Kloppers wants to merge with Rio to create the world''s biggest producer of copper and vie with Brazil''s Vale. Vale was reported in Brazil media to have dropped its negotiations with Xstrata today.

Rio stock rose 1% while BHP stock gained 2.6%.

Gainers and losers

Of the ASX 200 index stocks, Allco Finance Group led the gainers with a rise of 28.2% followed by increases in Sundance resource of 16.2%, in Perilya Ltd of 14.5%, in Mincor Resources of 8.6%, and in Riversdale Mining of 8.5%.

Of the ASX 200 index stocks, Macquarie DDR Trust led the decliners with a fall of 4.7% followed by losses in Ten Network of 4.3%, in APN/UKA European of 3.8%, in Computershare Ltd of 3.7% and in Sunland Group of 3.6%.

Santos'' share up on management changes

Australia''s third- biggest oil and gas producer, Santos Ltd''s share rose 8% at the close of trade after it appointed new chief executive. Santos Chairman Stephen Gerlach yesterday named David Knox who is expected to help drive expansion into liquefied natural gas. The appointment followed the resignation of its Managing Director and chief executive, John Ellice-Flint.

Woodside Petroleum Ltd gained 5.2%.

Perilya and CBH to merge

The Directors of Perilya Limited and CBH Resources Limited today announced a proposal to merge their businesses to create the world''s ninth-largest zinc producer. The proposed merger would be implemented via interdependent schemes of arrangement for the acquisition of all the CBH ordinary shares and CBH convertible notes by Perilya.

The merger would result in the Broken Hill ore mines with a single owner for the first time in its history and could result in operational efficiencies.

The combined company hopes to have a diversified production base through multi-mine operations at Broken Hill, Endeavor and Flinders and will have a broader development pipeline including the Panorama and Mount Oxide projects and the Hera deposit.

Under the terms of the merger, CBH shareholders will receive one Perilya ordinary share for every three CBH shares or one Perilya option for every twenty CBH shares and one Kimberley Metals share for each 9.2 CBH shares. Options will have an exercise price of $2.00 and expire on 31 December 2010.

Based on the volume weighted average of the trading prices on ASX of Perilya and CBH for the one month including 19 March 2008, and the value of the Perilya option, the merger would provide a premium to CBH shareholders of approximately 27%.

Perilya rose 15% and CBH gained 14%.

IMF to fund class actions against four Australian fund managers

Listed litigation funder IMF Australia today announced that it would fund shareholder class actions against four Australian fund managers that hit trouble after the global credit crisis emerged last year.

IMF announced today it would fund claims shareholders may bring against Allco Finance Group, MFS, Centro Properties and Centro Retail.

The claims against each of the companies relate to alleged breaches of their continuous disclosure obligations between August last year and in the first two months of this year.

During the six months, shares in the four finance companies slid dramatically as they struggled with heavy debt loads and complex financial structures. The four companies have all embarked on rescue plans, selling off some of their assets and funds to pay down crippling levels of debt.

Shares in MFS have been in a trading halt after a failed bid to restructure the company resulted in a near 70% price plunge to just 99 cents on January 18. Since then, the company has frozen its biggest fund and started a fire sale of assets to relieve a huge debt burden.

Shares in Allco Finance Group rose 33%, while Centro Properties units were up 3.3% and IMF shares added 10%.