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UPDATE 2-Australia's Mineral Deposits rejects higher Eramet offer

Published 14/06/2018, 04:38 pm
© Reuters.  UPDATE 2-Australia's Mineral Deposits rejects higher Eramet offer

* Eramet shrugs off rejection, awaits bid acceptances

* No. 5 shareholder says willing to accept Eramet's offer

* No. 2 shareholder undecided

* Offer due to close on July 13

* Mineral Deposits shares close at offer price of A$1.75 (Adds Eramet, major shareholder comments)

MELBOURNE, June 14 (Reuters) - Mineral sands producer Mineral Deposits MDL.AX on Thursday advised its shareholders to reject an increased A$345 million ($261 million) takeover bid from French miner Eramet SA ERMT.PA , saying it still undervalued the company.

Eramet on Wednesday boosted its all-cash offer for Mineral Deposits (MDL) to A$1.75 a share from A$1.46 previously, but that was well below an independent expert's valuation of Mineral Deposits between A$2.04 and A$2.52. Eramet spokesman said the independent expert's valuation failed to reflect the risks and challenges in the titanium dioxide and zircon joint venture that Mineral Deposits and Eramet jointly own.

Eramet, which had declared the revised offer as final, still hopes to win over enough shareholders to at least secure majority control of the company by the close of the offer on July 13.

"We are now seeking to bring clarity to this situation and enable a decision from shareholders, with what we believe is a highly compelling offer that is last and final," an Eramet spokesman said.

Mineral Deposits' no.2 shareholder, fund manager Allan Gray, with a 14 percent stake, is undecided whether to accept the offer.

"We're not ruling it out. But was I disappointed with A$1.75? Absolutely," said Allan Gray Managing Director Simon Mawhinney.

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He said his fund would have to weigh up whether the high quality of the joint venture's ore and "extraordinarily long reserve life" were enough to offset the operating risk that comes with it.

Mineral Deposits' fifth largest shareholder, Ellerston Capital, with a 5.3 percent stake, said it was comfortable with the revised offer as it provided certainty at a "fair price".

"We believe that the increased offer represents a positive outcome for MDL shareholders, with the price being very close to our assessment of fair value for the business," said Michael Courtney, a portfolio manager at Ellerston.

Another shareholder, Sandon Capital, last week told Reuters its estimate of Mineral Deposits' value was within the independent expert's range. proposed acquisition was aimed at consolidating the TiZir joint venture, in which each company has a 50 percent stake. TiZir operates a titanium dioxide and zircon business in Senegal and Norway that mainly supplies the paint industry.

Mineral Deposits shares closed up 2.7 percent at A$1.75, compared with a 0.1 percent decline in the broader market .AXJO .

($1 = 1.3226 Australian dollars)

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