Iluka's offer for Kenmare may not be looked upon favorably by market
The market is unlikely to look favorably upon ASX-listed mineral sands miner Iluka Resources’ offer for its UK-listed rival Kenmare Resources, the Australian Financial Review reported. The report said that JPMorgan analyst Sujit Day claimed that the transaction could cost Iluka up to AUD 600m (USD 562m) and include nearly AUD 300m in net debt. Day noted that Iluka is struggling under tough conditions in the mineral sands area and investors are unlikely to respond well to efforts to increase its exposure, rather than diversify. Day noted that in current market conditions Iluka will have net debt of AUD 124m by year end, following a loss of AUD 36m.
Another report in the Australian Financial Review said, without citing its source, that Goldman Sachs is advising Iluka on the deal.
The report said Iluka is likely to seek a friendly merger with Kenmare and could offer 20 pence per share.
The article cited Tim Schroeders, a fund manager at Pengana Capital, as saying that the merger could benefit both businesses, which have fallen out of favor with investors. Schroeders said the deal could offer both businesses a chance to make a new move forward.
Schroeders also said that Iluka could divest its iron ore royalty asset after the deal.
Source Australian Financial Review