The company may seek exemption from Australian takeover rules

MELBOURNE, Australia - A Chinese State-owned nuclear power producer could be forced to make a bid for Australia's Extract Resources worth $2.7 billion as part of a bid for Kalahari Minerals, as China looks to secure uranium from Africa.

A unit of China Guangdong Nuclear Power Holding Corp (CGNPC) is lining up a $1.23 billion offer for Kalahari, Extract's top shareholder with a 43 percent stake.

The move on Kalahari sent Extract's shares to an 18-month high on Wednesday on bets that the company had been put into play, pitting the Chinese against Extract and Kalahari's 14 percent shareholder, global miner Rio Tinto.

"Rio could block a bid or turn around and bid themselves. This is going to be interesting," said Ric Ronge, a portfolio manager at Pengana Capital, which does not own shares in Extract.

Uranium is key to China's push to use cleaner energy, with 28 nuclear reactors under construction as the country races to meet soaring energy demand.

If CGNPC took over Kalahari, it would own more than 20 percent of Extract, the threshold at which Australian rules would require it to make a takeover offer for Extract.

The Chinese company said on Monday it would seek an exemption from that rule.

Extract said on Wednesday to protect all its shareholders, it would ask the Australian Securities and Investments Commission (ASIC) to grant

that relief to CGNPC on condition that "all Extract shareholders are not disadvantaged in any way".

If the exemption is not granted, the Chinese company would be required to make a matching takeover offer for Extract Resources.

Extract shares jumped as much as 8.6 percent and last traded up 7.8 percent at A$10.71 ($10.81), valuing the company at A$2.7 billion.

In a similar case last year, the ASIC refused to force Spanish construction group ACS to buy out the minorities in contractor Leighton Holdings as part of ACS's bid for Leighton's German parent, Hochtief AG.

ACS was not forced to bid because there is an automatic exemption to the takeover rules when the stake is acquired through a takeover of a company that owns more than 20 percent of an Australian company and is listed on one of several exchanges.

The Kalahari takeover does not fall under that automatic exemption because Kalahari is listed on London's AIM exchange, which is not on the list of approved exchanges, an ASIC spokesman said.

Reuters

(China Daily 03/10/2011 page16)