Anglo a slim hope for MIM

But the chances of a rival bid for the Brisbane mining house are considered slim by most analysts and fund managers who have been watching the unfolding of the long-running takeover deal with Xstrata.

MIM shares closed 8c higher at $1.68 yesterday.

On Monday Swiss-owned Xstrata launched a $1.72-a-share takeover bid, valuing MIM at $4.9 billion. At this stage most observers expect Xstrata, whose London-listed shares jumped 11 per cent on the news, will carry the day.

Citigroup Smith Barney and Macquarie Equities said Anglo was Xstrata's most probable rival but considered a bid unlikely. Smith Barney said the South African group had the most potential synergies of its peers ``in integrating the Bowen Basin coal assets in Queensland".

However, the broker argues that ``Anglo may be deterred from launching a counter-bid because of MIM's low asset quality [excluding coal], the criticism it received for overpaying for Disputada and wanting to keep the powder dry" for a go at WMC Resources.

WMC Resources, whose chief executive Andrew Michelmore has expressed interest in MIM, is also a rumoured suitor but sources close to the Melbourne group said the board was not interested in competing with a cash bid at the $1.72 level.

BHP Billiton and Rio Tinto, other potential rivals, are not thought to be interested in MIM's assets, while Canada's Teck Cominco would find it hard to fund a rival offer, according to Smith Barney.

In a report critical of the MIM briefing on Monday, UBS Warburg believes there is a ``low risk" of a competing bid: ``If there had been then the MIM board may not have supported this offer so readily.

``Investors might ask what the MD knows that rest of the board does not," UBS said of MIM managing director Vince Gauci's decision not to support the Xstrata offer. ``Some might suggest the `briefing' left investors with more questions than answers."

UBS argues that while in the long-term there ``could be more value in MIM", in the absence of takeover ``MIM shares would be trading in the $1.20-$1.30 range".

ABN Amro said Xstrata was ``highly likely to be successful" but noted ``scuttling the offer is not out of the question". ABN argues that if only 60 per cent of shareholders cast a vote at the June meeting to approve the scheme of arrangement [a common percentage], a share block equating to only 15 per cent of MIM's capital could wreck the scheme.

Given roughly 30 per cent of MIM is held by arbitrage funds which can now lock in a fair profit, a company would be able to buy such a blocking stake, ABN said. ``Or we may find that there is a groundswell of support from mums, dads and institutions for Vince and the team (and don't forget how parochial Queenslanders can be)."

But institutions are believed to have told the MIM board they would accept $1.60-$1.70.

The price ``is very much at the low end of the Grant Samuel [$1.70-$2.24] valuation," said Ric Ronge, senior investment manager at Invesco Asset Management. ``But $1.72 is nothing to be ignored. We'll sit down and do our sums. I think it will get over the line".

Meanwhile, in Britain The Guardian reports Xstrata was forced to accept a 50 per cent discount on its ##900 million ($2.3 billion) rights issue as part of the takeover. Xstrata announced a 3-for-2 cash call Monday London time, offering shares at 245p each, against Friday's close of 486.5p.