HeraldÆs main asset is the undeveloped Dairi lead/zinc underground mining project in north Sumatra in Indonesia. The project, which is awaiting regulatory approvals from the Indonesian forestry department, is still to enter its development phase.
Herald has reportedly advised its shareholders to take no immediate action on the bid, which has been described as hostile and unsolicited. Bumi is offering A$2.25 a share, which is a 32% premium to the one-week volume weighted average of Herald shares up to December 11. Bumi argues that this will allow Herald shareholders the opportunity to "realise full value for their shares at a substantial premium to historic trading levels, in an environment of declining zinc and lead prices".
ôBumiÆs experience in the Indonesian mining sector and the requirements of the Indonesian regulatory process make it uniquely positioned to advance the Dairi zinc/lead development project in an efficient and timely way,ö says Bumi chairman Ari Hudaya, pointing to the significant delays Herald has suffered in gaining regulatory approval to begin developing Dairi.
However, Herald spokespeople say that they are not aware of any special circumstances allowing Bumi to be better positioned than Herald to secure the forestry approvals, since IndonesiaÆs largest mining company - PT Aneka Tambang û controls a 20% stake in the Dairi project. PT Antam is 65%-owned by the Indonesian government.
Herald is due to issue a ôtargetÆs statementö as a response to the bid, in which the company will either formally recommend or reject the offer. At this point, shareholders will be free to make up their own mind. Bumi, for its part, will require its own shareholdersÆ approval before proceeding with a potential acquisition.
Credit Suisse is providing financial advice to Bumi for the offer and Mallesons Stephen Jacques is Bumi's Australian legal adviser.
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