herald in talks to fend off bumi bid

Herald in talks to fend off Bumi bid

December 20, 2007

ZINC hopeful Herald Resources has entered into discussions with a number of other parties in a bid to fend off a hostile takeover from Indonesia's PT Bumi Resources.

Herald (ASX: HER: quote), which is the focus of an unsolicited $455 million bid from Indonesian coal miner Bumi, said today it was “currently holding discussions” with a number of parties.

Executive director Michael Wright said “all options were on the table at this stage” but declined to comment further on the discussions.

“There are other parties interested so we need to pursue those discussions to conclusion,” Mr Wright told AAP in an interview.

“We are very willing to engage with Bumi in relation to their offer but we're currently considering their bidder's statement at this stage as our primary responsibility.”

Speculation suggests zinc and lead producer Perilya (ASX: PEM: quote), which holds 8.9 per cent of Herald, is potentially one of the groups, while Hong Kong-based investment bank Crosby Capital Partners has indicated it is looking at the situation.

Crosby has been active on the Australian resources scene, launching failed bids for uranium explorer Marathon Resources (ASX: MTN: quote) and Tethyan Copper, and purchasing Orchard Petroleum.

Analysts have suggested it would be hard for other companies to compete against Bumi in its pursuit of Herald.

“We believe it would be difficult to beat Bumi in a bidding war for assets in Indonesia,” brokerage UBS said in a December 12 client note.

“We do not believe Perilya would be in a position to counter offer for the group.”

Perilya general manager of sustainable development Peter Eggleston was unavailable for comment.

Bumi, Indonesia's largest producer of thermal coal, launched its all-cash offer of $2.25 for each Herald share last week.

An independent report commissioned by Bumi has valued Herald at between $2.03 and $2.39 per share.

Herald reiterated today its advice to shareholders to take no action until the board formally assessed the Bumi bid.

The company's key project is the $US220 million ($257 million) zinc-lead Dairi project in north Sumatra, held in joint venture with Indonesian state-owned mining company PT Antam.

Herald was been waiting more than two years for the necessary environmental approvals to commence underground mining at Dairi.

Shares in Herald gained 3 cents to $2.27 by late afternoon.