Australia based BC Iron is on its way take over Iron Ore Holdings (IOH). The news is now confirmed and the acquisition notification is showing on Iron Ore’s official website.
This is the first major takeover of BC Iron. The company operates mainly in West Australia and is one of the company prominent iron ore miners. Majority of Iron Ore’s stocks are owned by Kerry Stokes’ company Australian Capital Equity. The acquisition will fetch ACE $250 million.
IOH was previously traded at $0.88 per share. For every IOH share, BC Iron is offering 10 cents cash 0.44 BC Iron shares, which accounts for a whopping 80% increase in IOH share price. As a result of the acquisition IOH shares are now being traded at $1.59 per share.
The takeover allows IOH to own 36.6 per cent of the joint company and ACE to own 19 per cent stake. The IOH board of directors has unanimously recommended to accept the offer in the absence of a better proposal. Once the takeover is complete, two IOH nominees will be invited to join the BC Iron Board.
BC Iron is currently operating in the Nullagine iron ore mine. The site is in Pilbara which is in north-west Western Australia. A company called Fortescue Metals Group owns 25 per cent of the mine. BC Iron has assets in Brazil which it could explore. If a comparison is done between BC Iron and IOH, the former is worth $400 million more than the latter. The market value of IOH is $224 million.
IOH is working on a major project at a place called Cape Preston East which is in West Pilbara. Another project which will soon be operational is the Iron Valley iron ore project. This project is also in the Pilbara.
BC Iron has benefitted from the joint venture with Fortescue Metals Group. Already the volume exports from the Nullagine iron ore mine is more than 4 million tons per year. Another 8 million tons per year is estimated to be added in the forthcoming years if the Buckland Hill and Iron Valley projects from IOH are added into the list.
Shareholders from both companies will get benefitted as IOH shareholders will be a part of a bigger family that has access to a massive volume of export sales. As for shareholders of BC Iron, the deal with IOH will elongate the company’s mining operation to 20 years.
Details about the acquisition can be found here.