Bauxite Resources Ltd.'s board recommended that shareholders reject Mercantile OFM Pty. Ltd.'s takeover offer to buy 1 of every 2 fully paid shares in Bauxite Resources that it does not already own for 9 Australian cents apiece.
In its Dec. 18 target statement, the miner said an independent expert found that the offer is neither fair nor reasonable and put a preferred valuation of 12.1 Australian cents on each Bauxite Resources share, 34% higher than Mercantile's offer price. The company previously advised shareholders not to take any action on the offer.
According to the company's board, the offer undervalues Bauxite Resources shares and deprives the company of the potential for alternative opportunities and shareholders of any subsequent higher offer. The board further said Mercantile's intentions for the company remain unclear and the funding for its offer is uncertain.
Certain Bauxite Resources directors and their associates, who control a total shareholding of about 27.8%, intend to reject the offer.
Bauxite Resources' board recently proposed a capital return of 5 cents per share, totaling about A$10.7 million.