Monday, October 25, 2010

Counter bid for Sphere Minerals looking slim

I've posted a couple of times on the takeover bid of Sphere Minerals (SPH) by an Xstrata subsidiary (Sidero Pty Ltd) and the chance of a bidding war occurring.

Unfortunately the chances of this happening are fading and those that are holding may need to seriously consider selling on market above $2.50 or accepting the takeover at $2.50 per share.  Risks on holding this one are increasing.  Management for Sphere Minerals signed a 'no shop, no talk' clause which means that they cannot solicit any other offers (without paying a break fee) whilst Sidero Pty Ltd has extended the takeover offer period twice after acceptances have been slow rather than increasing the offer to encourage acceptances.  The other problem is that Sin-Tang, the possible other bidder, has accumulated a stake over 10% which means Sidero Pty Ltd will have to drop it's 90% acceptance condition.  Rumours are that Sin-Tang is going to announce some form of alternative proposal rather then counter bidding and the market tends to agree with the shares now starting to trade below $2.50, something which has not occurred for some time now.  One thing is for sure, without the bid of $2.50 the share price will drop.

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