Phosphate Australia gives Mercantile offer the bum’s rush

THE BOURSE WHISPERER: Phosphate Australia (ASX: POZ) has come out swinging in response to a revised on-market takeover offer by Mercantile Investment Company Limited (ASX: MVT).

The company has encouraged its shareholders to firmly reject the revised offer price of 2.2 cents per share (up from the original offer of 2 cents per share).

Phosphate Australia asserted the new offer continues to undervalue the company as it fall below its cash backing per share price of 2.5 cents, therefore placing zero value on the company’s projects.

The company highlighted a valuation of the company by an independent expert in financial services firm BDO, which has valued Phosphate Australia at 15.6 cents per share.

BDO placed a Preferred Value on Phosphate Australia’s projects at $21.5 million, which does not include cash and cash equivalents of approximately $4 million (as at 6 May 2015).

“Mercantile’s revised offer further reinforces the opportunistic nature of the bid by trying to acquire Phosphate Australia’s quality projects at essentially no cost,” Phosphate Australia executive chairman Jim Richards said in the company’s announcement to the Australian Securities Exchange.

“The revised offer continues to short change Phosphate Australia’s shareholders by placing zero value on the company’s quality projects.

“Since Mercantile’s original offer, we have substantially added to our cash position from the sale of share assets worth more than $800,000, which places Phosphate Australia in an even stronger cash position.

“The Independent Expert has valued our projects at $21.5 million and shareholders cannot benefit from any future exposure to these projects if they accept an undervalued cash offer now.”

Phosphate Australia’s assets include the Highland Plains phosphate project in the Northern Territory, which has a JORC 2004 Inferred Resource of 53 million tonnes at 16 per cent phosphate.

“We strongly believe this is one of the best phosphate projects in Australia, given it has an Inferred Resource and is in close proximity to existing infrastructure that provide potential transport solutions,” Richards continued.

“Increasing agricultural productivity is a key requirement to grow global food supply, and phosphate will play an important role in driving that growth.”