China Guangdong Nuclear Power Group Co., the nation’s second-largest reactor builder, made a 756 million-pound ($1.2 billion) bid for Kalahari Minerals Plc (KAH) as the Chinese government seeks uranium to boost atomic generation.
The proposed acquisition would give the state-owned company access to Extract Resources Ltd. (EXT)’s Husab uranium project in Namibia. Kalahari owns about 43 percent of Australia’s Extract, which calls its venture the fifth-biggest uranium deposit.
“This would give them a foothold in one of the largest uranium assets in the world and supply their plans to significantly grow their reactor fleet,” Simon Tonkin, an analyst at Patersons Securities Ltd. in Perth, said today. Rio Tinto Group, a shareholder in Kalahari and Extract, may seek to block the offer or make a counter bid, according to Tonkin. Bruce Tobin, a Rio spokesman in Melbourne, declined to comment.
China Guangdong made a “possible offer” of 290 pence a share, 11 percent above Kalahari’s March 4 close, it said in a statement yesterday. Kalahari rose 9.5 percent to a record 285 pence in London trading after earlier saying it was in talks with an unidentified third party. The acquisition by China Guangdong would be the second-biggest Chinese takeover of a foreign mining company, according to Bloomberg data.
Extract climbed 7.3 percent to A$9.94 at the 4:10 p.m. close in Sydney, the biggest gain since Oct. 15, compared with a gain of 0.2 percent for the benchmark S&P;/ASX 200 Index.
Extract’s directors will “consider the implications” of the proposed bid, the company said in a statement today to the Australian stock exchange. Extract said it recommends shareholders take “no action” and await advice from the board.
‘Attractive value’
“The Kalahari board believes this represents attractive value for Kalahari shareholders,” Mark Hohnen, chairman of the London-based company, said in the China Guangdong statement. Kalahari will recommend the proposal to its stockholders, according to the Chinese company.
China may raise its 2020 target for atomic power generation to 86 gigawatts, with annual investment of 70 billion yuan ($10.7 billion), the state-run China Daily said Jan. 26. In comparison, capacity may total 11.7 gigawatts by the end of 2011, the National Energy Administration said.
The plan is subject to regulatory approval in China and the securing of funding, the Chinese company said. China Guangdong would also seek approval from the Australian Securities & Investments Commission because a deal would give it more than 20 percent of Extract.
Offer price
China Guangdong’s offer is 17 percent more than the average price of Kalahari’s shares in the 20 trading days before the announcement of the bid. That’s less than the 33 percent average premium paid by Chinese companies for foreign mining companies in 10 comparable deals in the past 10 years, Bloomberg data show.
Kalahari’s stake in Extract is valued at about A$1 billion ($1 billion), based on Extract’s A$9.26 closing share price in Sydney yesterday, giving the company a market value of A$2.3 billion. Rio, the world’s third-largest mining company, has a 14 percent stake in Extract and 11.5 percent of Kalahari.
Extract, based in Perth, Western Australia, said last month it was in talks with London-based Rio about merging the companies’ uranium projects in Namibia. Extract also said it was talking to Kalahari “to explore various options that might simplify the Extract/Kalahari shareholding structure.”
Rio owns the Rossing uranium mine in Namibia. The deposit is the third-biggest producer of the nuclear fuel, accounting for 7 percent of world supply, according to World Nuclear Association figures.
Husab is about 7 kilometers (4.4 miles) from Rossing and 30 kilometers from Paladin Energy Ltd.’s Langer Heinrich project.
