Media magnate Kerry Stokes is preparing for a $135 million pay day after BC Iron snapped up a mining company owned by the Perth-based businessman.
Mr Stokes’ private company Australian Capital Equity plans to accept an offer from the Pilbara iron ore miner worth $250 million, or $1.59 per share.
The deal will deliver $135 million to Mr Stokes and more than double BC Iron’s potential production.
Australian Capital Equity owns a 53 per cent stake in Iron Ore Holdings (IOH).
IOH is developing the $744 million Iron Valley mine in the Pilbara which is expected to produce eight million tonnes of the steel making commodity each year once production begins in the coming months.
BC Iron managing director Morgan Ball said the deal would bring together two long-term assets and complement the company’s productive assets.
“In a year you’ll see us continuing to operate Nullagine at good cash flows, receiving Iron Valley cash flows and probably having made a decision on the best solution for a Buckland development,” Mr Ball told AAP.
As well as the Iron Valley project, IOH is also developing the Buckland project in the west Pilbara, which is in its feasibility stage.
The project includes plans to develop a mine, private haul road and a port at Cape Preston East, with the aim of producing eight million tonnes of iron ore each year.
BC Iron still expects its Nullagine joint venture project to produce six million tonnes of iron ore per annum over the next six years.
Mr Ball said Mineral Resources would continue to operate Iron Valley while BC Iron would prefer to operate Buckland which had a stand-alone infrastructure solution.
But it would consider alternatives if rail operator Aurizon built a rail line with Baosteel in the west Pilbara.
He also ruled out further acquisitions in the short-term amid iron ore price weakness.
Mr Ball added that both BC Iron and IOH ran relatively lean teams and had good staff synergies.
Under the takeover deal, IOH shareholders will receive 0.44 new BC Iron shares and 10 cents cash for each IOH share they own.
Based on BC Iron’s recent average share price of $3.39, the offer values IOH at $1.59 per share.
IOH’s board includes Kerry Stoke’s son Ryan Stokes and former West Australian premier Richard Court.
The price of iron ore is trading at around $US95 per tonne, but the BC Iron deal can be cancelled if the price falls below $US90 for more than 20 days in a row.
CMC markets analyst Michael McCarthy said the deal looked to be an opportunistic move.
“Given the structure of the deal and the opportunistic nature it is also quite a risky step in that they risk drawing attention to this one and might be outbid by someone with more firepower,” Mr Mcarthy said.
He said the shares were lower as investors sold the seller and bought the target.
BC Iron shares lost 10 per cent to close at $2.99, while IOH was up 39 per cent, at $1.32.