Xstrata trumps Norilsk withLionOre bid

KODE PPC ANDA

Xstrata (XTA.L) unveiled a richer agreed offer for Canada's LionOre Mining International worth C$6.2 billion (2.8 billion pounds) on Tuesday, trumping a bid from Russia's Norilsk Nickel .

London-listed Xstrata's bid, worth C$25 per share for the world's No. 10 nickel miner, is 16 percent above the C$21.50 offered on May 3 by Norilsk, the world's largest nickel miner.

"The board of directors of LionOre ... has unanimously approved entering into the amending agreement and recommends that LionOre shareholders tender to the increased offer," Xstrata said in a statement on Tuesday.

LionOre's previous line had been that Norilsk's offer was superior to the C$18.50 per share offered by Swiss-based Xstrata on March 26, a deal the Canadian miner had agreed to.

LionOre's shares rose by more than 13 percent, climbing well above the bid price on the Toronto Stock Exchange, suggesting investors expect an sweetened offer from Norilsk.

Just after midday in the North American session, LionOre stock was up C$3.15 at C$26.85.

"I think there's a strong possibility of Norilsk counter bidding," said Orest Wowkadow, an analyst at Canaccord Adams.

"I think, at the end of the day, Norilsk can pay more than Xstrata can," he said, adding that Xstrata would likely face shareholder opposition if it was seen to overpay, while Norilsk is privately controlled.

Norilsk Nickel declined immediate comment on Xstrata's latest offer. A company spokesman said management required time to evaluate its options.

Xstrata shares rose 0.9 percent to 2,722 pence, valuing the company at 26.4 billion pounds.

Since making that initial offer, Xstrata has got regulatory clearance from Australia, Canada and the European Union.

"With the break fee increased to C$305 million and all regulatory requirements in place, we do not anticipate that Norilsk Nickel will counter this increased offer," Investec Securities analyst Nick Hatch said in a broker note.

"The transaction remains both value and earnings accretive (for Xstrata)," said Hatch, who has a "buy" recommendation on Xstrata stock, with a 2,975 pence target.

But Merrill Lynch analysts said "consensus forecasts (for LionOre) are based on nickel prices which are low versus the current spot price ... Based on consensus net income of $693 million, we see ample room for Norilsk to raise their bid and still have an earnings accretive transaction."

Xstrata said the expiry date for its increased offer for LionOre was midnight Vancouver time on Friday, May 25.

Its battle for LionOre is reminiscent of last year's tussle for another Canadian nickel miner, Falconbridge Ltd.

Then, Xstrata entered the fray with a C$52.50 per share offer, valuing Falconbridge at C$20 billion, and eventually won with a C$62.50 bid.

LionOre did not return calls seeking comment.

KODE PPC ANDA