Australian M&A activity reaches record high

Merger and acquisition activity has been fairly hot recently according to a recent report.

In its Australasia Investment Banking Snapshot released last week Thomson Reuters said Australian-involvement in mergers and acquisitions had reached a record high of US$130.3 billion so far this year.

The business information group said this represents an increase of 78.1% from the same period last year and the busiest year-to-date volume.

Not prizes for guessing the country’s metals and mining sector came in as the busiest with US$27.8 billion, up 31.5% from the same period last year.

However, the food and beverage sector gave the rock kickers a run for their money with one of the biggest upsurges.

Food and beverage transactions have reached a total of US$18.1 billion from 33 deals so far this year compared to US$118.2 million from 25 deals in 2010.

One takeover that has been gaining plenty of exposure is the takeover bid by Focus Minerals for fellow gold junior Crescent Gold.

Focus announced it had now made the bid free of conditions, which could be due to the circling of a Hong Kong-based company Stone Mining, which has built a hefty stake in Crescent of its own.

Focus said it now holds a current stake of 66.3% of Crescent, whose shareholders, with the exception of Focus, voted in favour of the acquisition and conversion of up to $A13 million worth convertible notes in Crescent by Focus.

The conversion would take Focus’ stake in Crescent to 74.2%.

However, throwing a spanner amongst the proverbial it has come to light Stone has increased its stake in Crescent.

Stone first appeared on Crescent’s shareholder register on August 1 after building up a 5.9% stake with $4.46 million worth of on-market purchases.

Since then it has accumulated a holding of 11.6%, effectively blocking the Focus bid for over 90% of Crescent, which would enable it to move to compulsory acquisition.

The board of Crescent has recommended shareholders accept the Focus offer after receiving a warning from its suitor a superior offer was unlikely to be put on the table, given it has already compiled a controlling stake.

Stone is obviously on the lookout for some Australian gold with its Toronto-listed parent company Stone Resources picking up a 30.9% stake in ASX-listed gold junior A1 Minerals.

Over at Australian resources company Meridian Minerals a binding Heads of Agreement was signed with the company’s largest shareholder Chinese company Northwest Nonferrous International Investment Company.

Northwest’s interest in Meridian, currently 41.34 per cent, is held via its subsidiary Northwest Nonferrous Mining Australia, under which Northwest has agreed to acquire all of the outstanding ordinary shares of Meridian not currently owned by Northwest by way of a scheme of arrangement.

Northwest has agreed to pay Meridian shareholders a cash consideration of 14 cents per Meridian share, valuing Meridian’s equity at approximately A$68 million.

In its announcement to the Australian Securities Exchange Meridian said the offer price represents an attractive premium for Meridian shareholders on a range of measures, which included:

– A 22% premium to Meridian’s closing share price on 18 August 2011, the last trading day prior to the announcement;

– A 27.3% premium to Meridian’s closing share price on 19 July 2011, the last trading day prior to Northwest’s takeover expression of interest on 20 July 2011; and

– A 30% premium to Meridian’s volume weighted average price (“VWAP”) since 19 July 2011.

“We look forward to agreeing the transaction documentation with Northwest in the coming weeks and moving towards completion of a successful outcome in the best interests of all Meridian shareholders,” Meridian Minerals managing director Jeremy Read said in the announcement.

“A little over two years ago, Meridian’s share price was trading at A$0.02 with a market capitalisation of A$1.5 million.

“Therefore, the board believes that the agreement we have reached with Northwest will allow all Meridian shareholders to capture the significant share price appreciation we have seen over the past two years.”

Meridian Minerals chairman supported Read’s optimism saying, “Northwest has been a supportive shareholder of Meridian over the past two years and the offer Northwest has made to acquire all of the outstanding ordinary shares of Meridian not currently owned by Northwest is a vote of confidence in the Lennard Shelf Project and the advancement of the Lennard Shelf which Meridian has made since it commenced work on the Lennard Shelf in November 2009.”

Meridian said both parties will now work towards finalising the structure of the transaction and an implementation agreement by 31 August 2011.

After this time the company said it expects the transaction to be implemented over the next two to three months.