Shanghai PE firm makes $850 million bid for Discovery Metals

A Shanghai-based private equity firm is pursuing a USD$847 million takeover bid for Botswana-focused Discovery Metals (ASX:DML).

The Financial Times (paywall) reports that Cathay Fortune Corporation, a private equity firm controlled by self-made Shanghai-based billionaire Yu Yong, announced its offer to acquire all outstanding shares in the Australian-listed copper miner on Thursday.

Cathay Fortune has made a cash offer of AUD$1.70 per share at a premium of 17% to to Wednesday's settlement price and 51% to the volume-weighted average for the past 30 days.

The takeover is consider unusual in that Cathay Fortune is a private company when the tsunami of Chinese investment in African resources over recent years has been largely driven by state-owned behemoths.

Cathay Fortune also lacks any direct experience in the mining industry, with its $3 billion portfolio invested in a diverse array of sectors including telecommunications, air transport, finance, resources and automation.

The acquisition bid comes just following China's announcement in September of plans to launch 1 trillion yuan in stimulus spending on infrastructure to boost flagging economic growth. The raft of infrastructure projects is expected to give significant benefit copper prices.

Cathay Fortune will avail itself of a $600 million from the China Development Bank to finance the deal, while the state-run China-Africa Development Fund will retain a 25% share in the joint-venture acquiring Discovery Metals with Cathay Fortune holding the remainder.

BlackRock is one of Discovery Metals' largest shareholders with a 10.9% equity stake, while other significant owners include M&G Investment with a 7.6% stake, Genesis Asset Management with a 7.4% stake and Transaminvest SA with a 6.5% stake.

China's economic ties to Africa have expanded prodigiously over the past decade, on the back of infrastructure and investment spending by Chinese companies covetous of the continent's rich and untapped bounty of resources.

Discovery Metals closed up 3.44% in Thursday trading.


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