Mining companies Zinifex (ZFX) and Oxiana (OXR) said in a joint announcement that they have entered into a definitive agreement to join forces, effectively becoming the third largest miner listed on the ASX.
Shares in Zinifex jumped by 10% on the announcement.
Zinifex shareholders will receive 3.1931 Oxiana shares for each Zinifex share they own, with the combined entity to be owned 50% each between Oxiana and Zinifex shareholders respectively.
"We are proposing a true merger of equals and the ratio of 3.1931 Oxiana shares for each Zinifex share reflects this," said Oxiana chairman, Barry Cusack, and Zinifex chairman, Peter Mansell, in a joint statement.
"We believe the proposed merger will create value for both Oxiana and Zinifex shareholders.”
Upon completion of the agreement, the merged company will be re-named and remain headquartered in Melbourne, where both companies currently reside.
"The combined company will have a major presence in both the zinc and copper markets, both of which are strongly leveraged into the rapidly expanding economies of Asia and elsewhere in the developing world.”
"In addition, the combined group will have a very strong balance sheet and will be well-equipped to succeed in any market environment."
The companies said today that the directors from both Zinifex and Oxiana were "strongly supportive” of the agreement.
"Zinifex’s directors unanimously recommend that shareholders vote in favour of the proposed merger, in the absence of a superior offer.”
"Each director of Zinifex intends to vote all of the Zinifex shares they own in favour of the scheme."
The merger will be implemented by way of a scheme of arrangement between Zinifex and its shareholders. Zinifex will seek a court order to convene a shareholders’ meeting in May or June to vote on the scheme.
Zinifex and Oxiana said today that they believe that the new combined company will be better positioned for growth than either company on a standalone basis.
"The merger will combine two companies with highly complementary operational, development and exploration profiles and create a group with a market capitalisation of approximately $12 billion, making it the third largest diversified mining company listed on ASX."
It will have a large portfolio of diversified development and exploration activities in Australia, Asia and North America with a net cash balance of approximately $1.9 billion as at December 31, 2007, and combined earnings before interest, tax, depreciation and amortisation (EBITDA) in calendar year 2007 of approximately $1.7 billion.
The companies said that, subject to necessary approvals, they expect the merger to be implemented in June or July.
Shares in Zinifex rose by $1.20 or 9.16% to close up at $12.15, while Oxiana shed 7 cents to close down by 1.76% at $3.90.
