BHP Billiton Announces US$7.3 Billion Cash Offer For WMC Resources

BHP Billiton has announced a cash offer of A$7.85 per share for the entire issued capital of WMC Resources Limited , valuing WMC Resources equity at A$9.2 billion (US$7.3 billion).

The Board of WMC Resources has unanimously recommended that WMC Resources shareholders accept the BHP Billiton offer in the absence of a superior proposal and has indicated that the directors will be accepting this offer for their own holdings of WMC Resources shares on that basis.

The offer is A$0.85 per share higher than Xstrata's cash bid of A$7.00¹ per share and in the top half of the valuation range provided by Grant Samuel, WMC Resources' independent expert, in its Target Statement.

BHP Billiton Chief Executive Officer, Chip Goodyear said: "The acquisition of WMC Resources is a further step in BHP Billiton's strategy of developing, operating and maximising the performance of large scale, long-life, low-cost assets. It is an excellent opportunity to build on our existing nickel and copper businesses and bring uranium into our suite of energy products. Furthermore, the acquisition provides additional premium long-term options to satisfy continuing demand growth in China and other high-growth economies.

"BHP Billiton is best placed to maximise the value of WMC Resources' assets. No other potential purchaser brings to this transaction the experience and synergy benefits of already operating in both nickel and copper and the track record of consistent on-time, on-budget major project delivery.

"Our offer price is based on our normal valuation methodology using our standard pricing protocols and reflects WMC Resources' considerable expansion potential. We expect the acquisition to add material value to BHP Billiton shareholders over the medium to long term," Mr Goodyear said.

Specific benefits to BHP Billiton from this transaction include:

  • WMC Resources' nickel business comprises an outstanding set of assets, in terms of operating capability, country risk, scale and environmental standards, which will complement BHP Billiton's existing nickel business. The combined business will have a range of operations, products and technologies that will provide a robust and flexible platform for further growth.

  • BHP Billiton will have operating control of two of the world's four largest copper deposits. BHP Billiton's track record in developing and operating Escondida, the world's largest copper mine, ideally equips it to maximise the value of the large, long-life Olympic Dam resource base. Olympic Dam is the world's fourth largest copper resource and one of the world's 10 largest gold deposits.

  • The acquisition of WMC Resources will establish BHP Billiton as a major producer of uranium with the largest resource base in the world. Uranium is an important energy source in an increasingly energy intensive world. Not only is this valuable on a stand-alone basis but it complements BHP Billiton's existing energy portfolio of oil, gas and coal.

  • The inclusion of WMC Resources' businesses and opportunities in BHP Billiton's portfolio enhances its options to develop the production necessary to supply raw materials to high growth markets in the decades ahead.

  • BHP Billiton is best placed to maximise synergies in the nickel and copper businesses, marketing and other corporate functions. BHP Billiton will eliminate duplicate functions by using the proven systems and processes that were successfully used following the BHP Billiton merger in 2001. The annual corporate cost efficiencies are estimated to total A$115 million (US$91 million), with a one-time cost of A$120 million (US$95 million).

Commenting on the attractiveness of the offer to WMC Resources' shareholders, WMC Resources CEO Andrew Michelmore said: "This offer supports the view of the value of WMC Resources that the Board has consistently held. We will be working with BHP Billiton to ensure that this recommended offer is put to shareholders as soon as possible".

The offer will be made through a subsidiary by way of an off-market takeover bid under the Australian Corporations Act 2001 and will be funded from both new and existing debt facilities. BHP Billiton remains committed to an A credit rating and will retain financial flexibility following the acquisition. Following the acquisition, on a pro forma basis, BHP Billiton's net debt, as at 30 June 2005 is estimated to total US$12.4 billion with corresponding net gearing of 42 percent². The acquisition is expected to be earnings accretive in the financial year ending 30 June 2006.

The offer is subject to a number of conditions including BHP Billiton receiving necessary regulatory approvals and acquiring at least 90% of the number of WMC Resources ordinary shares on issue. The conditions are outlined in full in Appendix 1 to this release.

BHP Billiton holds economic exposure to 50.6 million WMC Resources shares (4.3% of the issued share capital) through cash settled derivative contracts.

WMC Resources has entered into a Deed of Undertaking with BHP Billiton in relation to BHP Billiton's offer. This includes a break-fee of A$92 million (US$73 million) payable to BHP Billiton in certain circumstances, including a successful competing takeover proposal. WMC Resources will provide full details of the Deed.

BHP Billiton's Bidder's Statement is expected to be lodged shortly and to be dispatched to WMC Resources shareholders in approximately three weeks.

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