reject avoca’s all scrip offer, page-8

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Avoca rejects KPMG's valuation for Dioro, but shares leap

29th May 2009, 14:00 WST


Acquisitive gold miner Avoca Resources has dismissed what it considers an inflated valuation for its takeover target Dioro Exploration.



KPMG's valuation of Dioro between $1.40 and $2.28 was contained in Dioro’s target statement released last night.



But today Avoca, which has made an all-scrip bid for the company valuing it at about 63 cents a share, noted KPMG’s preferred value did not reflect the value placed on Dioro by the market.



Avoca said Dioro’s closing price before its bid was 39.5 cents and 66.5 cents before the release of the target’s statement.



“Dioro shareholders should query the discrepancy between the KPMG valuation and the market price of Dioro shares,” Avoca said in a statement.



Dioro shares rose sharply today suggesting investors were betting on a sweetened offer from Avoca or a better offer from another party.



The company’s shares closed up 11.5 cents, or 16.91 per cent, to 79.5 cents after hitting an intraday peak of 85 cents.



Avoca shares also gained ground closing up five cents, or 2.86 per cent, at $1.80.



Dioro’s board yesterday reiterated its rejection of Avoca's bid and urged shareholders not to accept the offer.



It also said it was fielding other approaches.



“Ongoing discussions with various parties may potentially result in a counter-offer to the Avoca offer or an offer to acquire all or a significant portion of Dioro’s assets,” it said.



The stern rejection follows speculation that Dioro’s joint venture partner in Frog’s Leg, Canada’s La Mancha, may launch a rival bid. La Mancha owns 51 per cent of Frog’s Leg and Dioro 49 per cent.



The target statement also said Dioro shareholders would be exposed to increased debt levels if the bid succeeded.



Avoca, which already holds nearly 15 per cent of Dioro, dispatched its bidder’s statement last week, following approval from the Foreign Investment Review Board.



The approval is required because its major shareholder is Switzerland-based Pala Investments Holdings.



STUART McKINNON and LOUISE BURKE

http://www.thewest.com.au/default.aspx?MenuID=3&ContentID=144733