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MELBOURNE — Australian miner Oxiana Ltd. will buy rival Zinifex Ltd. in a share swap worth $5.8 billion, the two companies said Monday, creating the world's second-largest producer of zinc.
The deal will give the pair more scope for acquisitions and mine development to meet Chinese and Indian demand for zinc, copper, gold, silver and other precious metals, they said.
The combined company — to be split equally among Oxiana and Zinifex shareholders — will have a market capitalization of about $11 billion, the companies said in a joint statement.
The acquisition, which has been expected for months, comes amid a global mining consolidation driven by strong demand for industrial metals. The combined company will likely give the new entity the leverage to make bigger acquisitions in Australia and abroad.
The deal will require Zinifex shareholders to vote in favor of receiving 3.1931 Oxiana shares for every Zinifex share they own, while Oxiana shareholders won't be required to vote.
The offer values Zinifex shares at 12.68 Australian dollars each ($11.81), 14 percent more than their Friday closing price.
"Both companies firmly believe in the continued strength of demand for base metals coming from the extraordinary economic growth from development in China, India and rest of the developing world," Zinifex Chief Executive Andrew Michelmore, who will head the combined company, said during a conference call.
There is unlikely to be much concern from regulators about the deal. The two companies are not major competitors in zinc and lead, where Zinifex dominates, or copper and gold, which comprises the bulk of Oxiana's production.
The new company will look at growing both by exploration and acquisition and will look at potential purchases in Australia, South America, Africa and Southeast Asia, where Oxiana is already firmly established, Michelmore said.
A new name had not been chosen yet, but the company will be headquartered in Melbourne.
Oxiana Chairman Barry Cusack will be chairman of the new company. Oxiana Managing Director Owen Hegarty will be a director and chair a Board Integration Committee.
Shares of Zinifex rose to a two-month high on the news and closed up 9.2 percent at 12.15 ($11.32). Australian dollars Oxiana shares closed 1.8 percent lower at 3.90 ($3.63), Australian dollars giving its offer for Zinifex a market value of 6.06 billion Australian dollars, or $12.45 a share.
The firms expect to complete the acquisition by June or July, with Zinifex shareholders expected to vote on the deal in May or June. Each company has agreed to pay a "break fee" of 55 million Australian dollars ($51 million) if the deal does not go through.
Morgan Stanley and Gryphon Partners are advising Oxiana. UBS and Lazard Carnegie Wylie are advising Zinifex.
