Lion Fights Indophil Bid With Offer Of Cash Return

Sydney Morning Herald

Tuesday May 20, 2008

Jamie Freed

THE mining investment house Lion Selection has offered to return about $267 million of funds to shareholders - and possibly to return even more cash and de-list - as an alternative to a hostile scrip offer from Indophil Resources.

Lion expects to hold a meeting next month at which shareholders will vote on a plan to return about $1.35 a share to investors based on proceeds from the sale of its stakes in the Cracow goldmine in Queensland, Indophil and the Zambian nickel miner Albidon.

Lion last week announced the $80 million sale of its 30 per cent interest in Cracow, along with an agreement to sell 17.8 per cent of Indophil to Xstrata Copper for $91 million.

"It's always been their philosophy to sell things when they are offered a fair price," the ABN Amro Morgans analyst Chris Brown said.

Lion has not yet sold its stake in Albidon, which it holds indirectly through its stake in two unlisted Africa Lion funds. But the looming sale of the 20.5 per cent stake is believed to have elicited interest from several corporate players.

Lion unveiled the plan to return $267 million to investors yesterday, but the company's managing director, Robin Widdup, said it would consider alternatives that would create value for shareholders.

"It may be possible to take the whole company private and give cash back for the whole lot," Mr Widdup said, adding Lion would then retain its Melbourne office to manage its unlisted funds.

Lion has consistently traded below the value of its net tangible assets, which mostly comprise cash and its investments in listed equities. The Goldman Sachs JBWere analyst Ian Preston said the planned cash return was unlikely to close that gap.

Indophil, which could eventually need $US1 billion or more to finance its share of the cost of developing the Xstrata-operated Tampakan copper-gold project in the Philippines, has said its bid for Lion could close the valuation gap.

Xstrata last week launched a $426 million hostile cash bid for Indophil - conditional on the failure of Indophil's offer for Lion - which served to increase the value of Indophil's bid for Lion.

Indophil's chief executive, Richard Lauffman, said Lion's plan to return cash was "little more than a reactive and desperate attempt to break up the company in an effort to make the Indophil bid go away".

Mr Widdup said he preferred the return of cash to shareholders to Indophil's bid, since the Tampakan project was risky.

"In my view it's a really simple black-and-white choice," he said.

The manager of Lion, Lion Manager, is expected to receive a windfall to compensate it for lost fees if Indophil's bid is successful. But Lion Manager has offered to cut its management fee if the plan to return cash to shareholders proceeds, since Lion would become a significantly smaller company.

Lion shares closed 13c higher at $1.785, while Indophil shares closed 3c higher at $1.12.

© 2008 Sydney Morning Herald

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