EXHIBIT 99(a)
THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE
ATTENTION
If you are in any doubt how to act, you should consult your financial or legal
adviser as soon as possible.
RECOMMENDED CASH OFFER
BIDDER'S STATEMENT AND TARGET'S
STATEMENT
FOR RECOMMENDED OFFER
BY
[CLEVELAND-CLIFFS LOGO]
CLEVELAND-CLIFFS AUSTRALIA PTY LIMITED
(ACN 112 437 180)
[PORTMAN LOGO]
TO PURCHASE ALL YOUR ORDINARY SHARES IN
PORTMAN LIMITED
(ABN 22 007 871 892)
FOR EACH PORTMAN SHARE YOU WILL RECEIVE A$3.40 CASH.
PORTMAN DIRECTORS UNANIMOUSLY RECOMMEND YOU ACCEPT THIS OFFER
(IN THE ABSENCE OF A SUPERIOR OFFER)
Please call 1800 24 23 00 (TOLL FREE) (callers in Australia) or +61 2 9207 3622
(callers outside Australia) if you require assistance with your acceptance.
The offer is dated 24 January 2005 and will close at 7pm (Perth time) on 25
February 2005, unless extended.
ADVISERS TO CLEVELAND-CLIFFS ADVISERS TO PORTMAN
[WILSON LOGO] [HILL STREET LOGO] [GRESHAM LOGO]
m BLAKE DAWSON WALDRON
LAWYERS
1
CONTENTS
I LETTERS FROM THE CHAIRMEN
Letter from the Chairman of Cleveland-Cliffs Australia Pty Limited 3
Letter from the Chairman of Portman Limited 4
II ABOUT THE OFFER
Summary of the Offer 5
Why you should accept the Offer 7
How to accept the Offer 11
III BIDDER'S STATEMENT 12
Appendix 1 - Formal terms of the Offer 42
Appendix 2 - Conditions of the Offer 51
Appendix 3 - Portman's announcements to the ASX since 31
December 2003 55
Appendix 4 - Joint announcement made on 12 January 2005 60
IV TARGET'S STATEMENT 67
IMPORTANT DATES
Bidder's Statement and Target's Statement lodged with ASIC 21 January 2005
Date of Offer 24 January 2005
Close of Offer Period (unless extended) 7pm (Perth time)
25 February 2005
IMPORTANT NOTICE
This booklet contains Cleveland-Cliffs Australia Pty Limited's Bidder's
Statement dated 21 January 2005 and Portman Limited's Target's Statement dated
21 January 2005.
The matters addressed in Section II represent a summary prepared by
Cleveland-Cliffs Australia Pty Limited and Portman Limited of matters relating
to the offer and the reasons to accept the offer. The information in Sections I
and II is qualified by the detailed information set out elsewhere in this
booklet. You should read all of this booklet before deciding whether to accept
the offer and in considering the information contained in the documents you may
wish to seek independent financial and taxation advice.
DEFINITIONS
Terms used in Sections II and III of this booklet have the meaning given to them
in section 9 (Glossary) of the Bidder's Statement.
Terms used in Section IV of this booklet have the same meaning given to them in
section 9 (Glossary) of the Target's Statement.
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[CLEVELAND-CLIFFS LOGO]
LETTER FROM THE CHAIRMAN OF CLIFFS AUSTRALIA
21 January 2005
Dear Portman shareholder,
On behalf of the directors of Cleveland-Cliffs Australia Pty Limited ("CLIFFS
AUSTRALIA"), a wholly owned subsidiary of Cleveland-Cliffs Inc ("CLIFFS"), I am
pleased to enclose Cliffs Australia's offer to acquire all your shares in
Portman Limited ("PORTMAN") for A$3.40 per share in cash. We believe that our
offer provides you with an attractive cash value for your shares.
This booklet includes Cliffs Australia's Bidder's Statement, which sets out the
details of the offer, and Portman's Target's Statement, in which your directors
unanimously recommend that you accept the offer in the absence of a superior
offer.
CASH OFFER FOR YOUR PORTMAN SHARES
Cliffs Australia's offer for your Portman shares is A$3.40 cash per share. This
represents:
- - a substantial premium of 21.8% to the one month volume weighted average
price of A$2.79; and
- - a premium of 11.5% to Portman's closing share price of A$3.05 on 7 January
2005, the last date that Portman shares traded prior to the announcement
of the offer.
During the one month period to 7 January 2005 it is important to note that 24.9%
of Portman's shares were traded. Cliffs Australia believes that this premium
over the average price paid for such a substantial parcel of Portman shares
strongly demonstrates the attractiveness of the offer.
SUPPORT FOR THE OFFER
The board of Portman has unanimously recommended that, in the absence of a
superior offer, Portman shareholders accept the offer and all the directors of
Portman have announced their intention to accept the bid in the absence of a
superior offer.
OUR INTENTIONS
Cliffs Australia intends to continue the business of Portman and not make any
major changes to the business or the deployment of Portman's assets. Cliffs
Australia also intends to utilise the extensive Australian mining, marketing and
corporate expertise of the Portman management team.
CLIFFS
Based in the United States and founded in 1847, Cliffs is the largest producer
of high-quality iron ore pellets in North America and sells the majority of its
pellets to integrated steel companies in the United States and Canada. Cliffs
operates six iron ore mines located in Michigan, Minnesota and Eastern Canada,
which currently have the capacity to produce approximately 37 million tonnes of
iron ore pellets annually. Based on Cliffs' percentage ownership of the mines it
operates, its share of the pellet production capacity is currently approximately
23 million tonnes annually, representing approximately 28% of total North
American annual pellet capacity. Cliffs is listed on the New York Stock Exchange
and has a market capitalisation of approximately US$1.4 billion.
Cliffs Australia is confident that the offer is in the best interests of all
Portman shareholders and I encourage you to accept the offer as soon as
possible.
Sincerely
/s/ John S. Brinzo
- ------------------
John S. Brinzo
Director
Cliffs Australia
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[PORTMAN LOGO]
LETTER FROM THE CHAIRMAN OF PORTMAN
Dear Fellow Portman Shareholder,
As I indicated to you in my recent letter, your directors unanimously recommend
that you ACCEPT Cliffs Australia's offer, in the absence of a superior offer
emerging.
Your directors are all intending to accept this offer for their shareholdings in
the absence of a superior offer.
We believe that the offer of A$3.40 is fair and represents an opportunity for
Portman shareholders to realise the value of their holdings at a price that
fully reflects the anticipated surge in iron ore prices and at an acceptable
premium for control. We set out our reasons for believing the offer is fair in
section 3 of our Target's Statement which forms part of this booklet.
Since the announcement of the offer by Cliffs Australia, no other party has
announced a superior offer for Portman Shares.
To accept the offer
- - if you hold your Portman shares in an issuer sponsored holding, complete
and sign the enclosed acceptance form in accordance with the instructions
on it and return it to the address indicated on the form; or
- - if you hold your Portman shares in a CHESS holding, either:
(i) instruct your controlling participant (for example, your broker) to
initiate acceptance of this offer; or
(ii) complete and sign the enclosed acceptance form in accordance with
the instructions on it and return it to the address indicated on the
form; or
- - if you are a broker or a non-broker participant, initiate acceptance in
accordance with the requirements of the ASTC Settlement Rules.
Yours sincerely,
/s/ George Jones
- ----------------
GEORGE JONES
CHAIRMAN
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SUMMARY OF THE OFFER
THE INFORMATION IN THIS SECTION IS ONLY A SUMMARY OF THE OFFER. APPENDICES 1 AND
2 OF THE BIDDER'S STATEMENT CONTAIN THE FULL TERMS AND CONDITIONS OF THE OFFER.
YOU SHOULD READ THE ENTIRE BIDDER'S STATEMENT AND TARGET'S STATEMENT BEFORE
DECIDING WHETHER TO ACCEPT THE OFFER.
THE OFFER Cliffs, through its wholly owned subsidiary Cliffs Australia,
offers to buy all of your Portman Shares for A$3.40 EACH IN CASH
on the terms set out in Appendices 1 and 2 of this Bidder's
Statement.
The Offer relates to all Portman Shares that exist or will exist
on 21 January 2005.
The Offer extends to all Portman Shares which are issued during
the Offer Period as a result of the exercise of Portman Options.
OFFER PERIOD The Offer is scheduled to close at 7pm (Perth time) on 25
February 2005 (but it may be extended).
PAYMENT If you accept the Offer in accordance with the instructions
DATE contained in the Offer and the Acceptance Form, you will be sent
payment within one month after the later of the date you accept
and the date the Offer becomes, or is declared, free of the
conditions to which it is subject. In any event, assuming the
conditions of the Offer are satisfied or waived, you will be
sent payment within 21 days after the Offer closes.
NO BROKERAGE You will not pay any brokerage costs or stamp duty if you accept
COSTS AND the Offer. These costs will be AND STAMP DUTY borne by Cliffs
STAMP DUTY Australia.
CONDITIONS The Offer is subject to the following conditions:
- minimum acceptance of 90%;
- Foreign Investment Review Board approval;
- between the Announcement Date and the end of the Offer
Period no orders (or applications for orders) being made
which restrain or prohibit or materially adversely impact
on the Offer, the completion of any transaction
contemplated by the Offer or the rights of Cliffs
Australia in respect of Portman Shares to be acquired
under the Offer, or which require the divestiture of
shares or assets (other than an application to or a
determination by ASIC or the Takeovers Panel in exercise
of the powers and discretions conferred by the
Corporations Act or an action taken by those persons set
out in subsections 657G(2) and 659B(1) of the Corporations
Act);
- between the Announcement Date and the end of the Offer
Period no specified event occurring that has or is
reasonably likely to have a material adverse effect on the
circumstances of Portman or any of its subsidiaries;
- no profit warnings by Portman between the Announcement
Date and the end of the Offer Period;
- no material acquisitions, disposals or expenditure by
Portman or any of its subsidiaries between the
Announcement Date and the end of the Offer Period;
- no persons exercising rights under certain agreements or
instruments with Portman as a result of the acquisition of
Portman Shares by Cliffs Australia between the
Announcement Date and the end of the Offer Period;
- no decline in the S&P ASX 200 Index below 3,500 on any
trading day between the Announcement Date and the end of
the Offer Period;
5
- no "prescribed occurrences" (being occurrences listed in
section 652C of the Corporations Act) occurring in
relation to Portman between the Announcement Date and the
end of the Offer Period; and
- agreements to cancel 75% of all of Portman Options being
entered into.
The above is a summary only and full details of all of the
conditions are set out in Appendix 2.
HOW TO You may only accept the Offer for all of your Portman Shares. To
ACCEPT THIS accept the Offer:
OFFER
- IF YOU HOLD YOUR PORTMAN SHARES IN AN ISSUER SPONSORED
HOLDING, complete and sign the enclosed Acceptance Form in
accordance with the instructions on it and return it to
the address indicated on the form; or
- IF YOU HOLD YOUR PORTMAN SHARES IN A CHESS HOLDING,either:
(a) instruct your stockbroker or Controlling Participant
to initiate acceptance of this Offer; or
(b) complete and sign the enclosed Acceptance Form in
accordance with the instructions on it and return it
to the address indicated on the form; or
- IF YOU ARE A BROKER OR A NON-BROKER PARTICIPANT, initiate
acceptance in accordance with the requirements of the ASTC
Settlement Rules,
before the end of the Offer Period.
PORTMAN Cliffs Australia will make individual proposals to each holder
OPTIONS of Portman Options to cancel each of their Options in
consideration for the payment to them of A$3.40 less the
relevant exercise price of each Portman Option. The
consideration for the cancellation will be provided by Cliffs
Australia. The agreement to cancel the Options will be subject
to the satisfaction or waiver of the conditions to which this
Offer is subject and the removal of Portman from the official
list of the ASX.
FURTHER If you have any questions in relation to the Offer or accepting
INFORMATION it, please contact the information line on 1800 24 23 00
(toll-free) (callers in Australia) or +61 2 9207 3622 (callers
outside Australia). Please note that in order to comply with
legal requirements, any calls to this number will be recorded.
Enquiries in relation to the Offer will not be taken on any
other telephone numbers.
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WHY SHOULD YOU ACCEPT THE OFFER
1. THE OFFER PRICE REPRESENTS A SIGNIFICANT PREMIUM TO PORTMAN'S RECENT
TRADING PRICES
The Offer Price is A$3.40 per share to be paid to shareholders who accept
the Offer. Cliffs considers that the Offer provides an attractive cash
premium for Portman shareholders to the levels at which Portman Shares
have been trading, namely:
- a 43.9% premium to the volume weighted average price for the six
months to 7 January 2005 (the last trading day before Portman
requested a trading halt on 10 January 2005);
- a 25.2% premium to the volume weighted average price for the three
months to 7 January 2005;
- a 21.8% premium to the volume weighted average price for the month
to 7 January 2005; and
- an 11.5% premium to the closing price of Portman Shares on 7 January
2005 .
The graph below illustrates the premium being offered by Cliffs Australia
relative to Portman's trading prices prior to announcement of the Offer.
[BAR GRAPH]
SOURCE: Iress Market Technology
Recent changes to stamp duty legislation in Western Australia have had the
consequence that an acquirer of more than 90% of the Portman Shares is
likely to have to pay duty of approximately 5.4% of the market value of
the land and chattels situated in Western Australia to which Portman is
entitled. This will increase the cost of the acquisition for Cliffs
Australia by approximately A$28.3 million (approximately 16 cents per
Portman Share).
2. THE OFFER IS BEING MADE DURING A PERIOD OF HIGH COMMODITY PRICES, AND
REFLECTS THESE CURRENT PEAK CYCLE CONDITIONS
All of Portman's sales revenues are derived from the sale of iron ore. The
development projects of Portman are also based solely on iron ore.
7
As shown in the chart below iron ore prices are at a 10-year high.
Therefore, the Offer is against this backdrop of historically high
commodity prices which Cliffs Australia considers were already reflected
in the pre-announcement market price of your Portman Shares.
[LINE GRAPH]
Source: Skillings Mining Review and The TEX Report
NOTES:
(1). Prices quoted as US$ per dry long ton unit (dltu) based on Hamersley
ore to Far East Asian customers on a "free on board" basis for the
Japanese Financial Year
There is no certainty that commodity prices will remain at these high
levels into the future and should they fall, the trading price of Portman
Shares could be adversely impacted.
By accepting the Offer, Portman shareholders will be able to take
advantage of the current high iron ore prices and the resulting increased
value of iron ore companies.
3. LIKELIHOOD OF ALTERNATIVE OFFERS TO GENERATE SUPERIOR VALUE
- On 1 July 2004, Consolidated Minerals Limited ("ConsMin") announced
that it had acquired a 7.85% interest in Portman such that it became
Portman's largest shareholder. On 16 July 2004, ConsMin announced
that it had increased its voting interest in Portman to 9.8% with a
subsequent increase to 14.8% announced on 6 September 2004. On 22
December 2004, ConsMin announced that it was no longer a substantial
shareholder in Portman and that it had disposed of its interests in
Portman. The detail provided in the Form 605 lodged with the ASX
indicates that on 22 December 2004 ConsMin conducted an on market
sale of 21.4m shares, or 12.2% of the issued capital, at A$2.75
(with the remaining 2.6% having been sold prior to that date). The
Offer from Cliffs Australia represents a 23.6% premium to the price
of this disposal.
- Since the Announcement Date, no other party has announced a superior
offer for the Portman Shares. The board of Portman has unanimously
recommended the Cliffs Australia Offer to its shareholders.
- There is the possibility that a superior offer may be made for
Portman Shares, however the recommendation from the directors of
Portman remains in the absence of a superior offer.
8
4. THE OFFER VALUE WILL BE PAID TO YOU IN CASH PROVIDING CERTAINTY OF VALUE
AND REMOVING SIGNIFICANT RISKS CURRENTLY BORNE BY YOU
The Offer provides to you immediate, certain value in the form of cash.
Cliffs has a strong balance sheet and appropriate funding arrangements in
place to finance this acquisition.
By accepting the Offer:
- You will receive A$3.40 cash per Portman Share (subject to the
conditions of the Offer being satisfied or waived);
- You will be sent payment within one month after the later of the
date you accept and the date the Offer becomes, or is declared, free
of the conditions to which it is subject. In any event, assuming the
conditions of the Offer are satisfied or waived you will be sent
payment within 21 days after the Offer closes; and
- You will not incur any brokerage charges by accepting the Offer from
Cliffs Australia that may otherwise be payable on the sale of
shares.
The certainty of this receipt of cash should be compared against the
uncertainties of remaining a Portman shareholder, including the likelihood
and timing of Portman delivering cash flows to you as a shareholder in the
form of dividends or other distributions and the uncertainty of how
Portman Shares might trade in the absence of the Offer.
5. THE OFFER REMOVES SIGNIFICANT RISKS THAT COULD AFFECT THE VALUE OF YOUR
PORTMAN SHARES
Mining projects are subject to a number of risks. By accepting the Offer,
you will receive cash for your Portman Shares, and will no longer be
exposed to the risks inherent in Portman that could affect the value of
your Portman Shares.
Risks which you will no longer be exposed to if you accept the Offer
include:
IRON ORE PRICE RISK
Portman's sales revenues are derived from the sale of iron ore. The price
of iron ore is determined by world markets, which are affected by numerous
factors outside Portman's control. As such, as a Portman shareholder you
are exposed to the volatility of iron ore prices, the prospect that they
may fall from their current, historically high levels and the potential
impact on Portman's sales revenues.
EXCHANGE RATE RISK
Portman generates all of its sales revenues in US Dollars. The Australian
Dollar revenue generated by Portman will be adversely impacted by a
strengthening of the A$ relative to the US$. This is outside of the
control of Portman. In order to partially mitigate this risk, Portman has
hedging in place to cover approximately 50% of forecast sales for 2005.
9
OPERATIONAL AND DEVELOPMENT RISKS
Portman's operations are subject to a number of factors that can cause
material delays or changes in operating costs for varying lengths of time.
Operational risks include weather and natural disasters, unexpected
technical problems, equipment failures, and disruptions of rail
infrastructure and ship loading facilities. Industrial disruptions may
also result in production losses or delays in the delivery of the product.
There are a number of development risks associated with the expansion of
the Koolyanobbing project and the development of the Northern Tenements
associated with the Koolyanobbing project which could result in lower than
planned production. These expansions represent the primary growth
prospects of Portman's production profile.
The risks associated with the expansion of the Koolyanobbing project
include the risks that estimates of ore reserves, production rates, and,
capital and operating costs will not prove to be accurate. In particular,
estimates of ore reserves, product quality and operating costs are
difficult to make, because they are largely dependent on the
interpretation of geological data obtained from sampling techniques and
feasibility studies, which are subject to various uncertainties.
All of the Portman directors by whom, or on whose behalf, Portman shares
are held intend to accept the offer in respect of their personal
shareholdings, in the absence of a superior offer.
THE DIRECTORS OF PORTMAN UNANIMOUSLY RECOMMEND YOU ACCEPT THE OFFER, IN
THE ABSENCE OF A SUPERIOR OFFER.
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HOW TO ACCEPT
Acceptances for the Offer must be received before the close of the Offer Period.
There are different ways to accept an Offer depending on the nature and type of
your holding.
FOR CHESS HOLDINGS OF PORTMAN SHARES
Please instruct your Broker or other CHESS Controlling Participant to initiate
acceptance of the Offer on your behalf in sufficient time for the Offer to be
accepted before the end of the Offer Period.
FOR ISSUER SPONSORED HOLDINGS OF PORTMAN SHARES
Please complete and execute the enclosed Acceptance Form in accordance with the
instructions on that form and within this booklet and return it to:
BY HAND BY MAIL(a reply paid envelope is enclosed)
Computershare Investor Computershare Investor Services Pty Limited
Services Pty Limited
Level 3, 60 Carrington Street GPO Box 7045
SYDNEY NSW 2001 SYDNEY NSW 2001
11
BIDDER'S STATEMENT
[CLEVELAND-CLIFFS LOGO] CLEVELAND-CLIFFS AUSTRALIA PTY LIMITED
(ACN 112 437 180)
12
CONTENTS
1 Important information 14
2 Information on Cliffs Australia and Cliffs 15
3 Information on Portman 17
4 Cliffs Australia's intentions 20
5 Information on Portman securities 25
6 Funding 28
7 Australian taxation considerations 30
8 Additional information 33
9 Glossary 38
10 Approval of Bidder's Statement 41
Appendix 1 - Formal terms of the Offer 42
Appendix 2 - Conditions of the Offer 51
Appendix 3 - Portman's announcements to the ASX since 31 December 2003 55
Appendix 4 - Joint announcement made on 12 January 2005 60
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1 IMPORTANT INFORMATION
1.1 LODGMENT UNDER THE CORPORATIONS ACT 2001
This Bidder's Statement is given by Cliffs Australia to Portman under Part
6.5 of the Corporations Act and sets out certain disclosures required by
the Corporations Act, including information about Cliffs Australia, Cliffs
and Portman, together with the terms of the Offer to acquire your Portman
Shares.
A copy of this Bidder's Statement was lodged with ASIC on 21 January 2005.
ASIC takes no responsibility for the content of this Bidder's Statement.
1.2 DATE OF BIDDER'S STATEMENT AND OFFER
This Bidder's Statement is dated 21 January 2005. It includes an Offer
dated 24 January 2005 on the terms set out in Appendices 1 and 2 of this
Bidder's Statement.
The Offer relates to all Portman Shares that exist or will exist on 21
January 2005 and extends to all Portman Shares issued during the Offer
Period on exercise of Portman Options.
1.3 DEFINED TERMS
Terms used in this Bidder's Statement are defined in section 9 (Glossary)
of the Bidder's Statement.
1.4 INVESTMENT ADVICE
This is an important document. In preparing this Bidder's Statement,
Cliffs Australia has not taken into account the individual financial
position and investment strategies of individual Portman shareholders.
Accordingly, before accepting the Offer contained in Appendices 1 and 2 of
this Bidder's Statement, you may wish to consult with your financial or
other professional adviser.
1.5 DISCLAIMER AS TO FORWARD LOOKING STATEMENTS
In addition to the historical information contained in this Bidder's
Statement, some of the statements appearing in this Bidder's Statement may
be in the nature of forward looking statements. Such statements are only
predictions and are subject to inherent risks and uncertainties. Those
risks and uncertainties include factors and risks specific to the industry
in which Portman operates as well as general economic conditions and
prevailing exchange rates and interest rates. Actual events or results may
differ materially. None of Cliffs Australia, Cliffs Australia's officers,
any person named in this Bidder's Statement with their consent or any
person involved in the preparation of this Bidder's Statement, makes any
representation or warranty (express or implied) as to the accuracy or
likelihood of fulfilment of any forward looking statement, except to the
extent required by law.
1.6 ENQUIRIES
Should you have any questions about this Offer or how to accept it, please
call the shareholder information line on 1800 24 23 00 (toll-free) from
within Australia or on +61 2 9207 3622 from outside Australia. Please note
that in accordance with legal requirements, these calls will be recorded.
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2 INFORMATION ON CLIFFS AUSTRALIA AND CLIFFS
2.1 CORPORATE
Cliffs Australia is a wholly owned subsidiary of Cliffs and was
incorporated by Cliffs for the purpose of making the Offer.
Cliffs Australia has not undertaken any business other than the making of
the Offer and seeking to cancel the Portman Options as further described
in section 5.4 of this Bidder's Statement. Cliffs Australia does not have
any subsidiaries.
2.2 DIRECTORS OF CLIFFS AUSTRALIA
Brief profiles of the directors of Cliffs Australia are as follows:
JOHN S. BRINZO is chairman and chief executive officer of Cliffs. He
joined Cliffs in 1969 as a financial analyst and was named Chief Executive
Officer in November 1997 and Chairman in January 2000. Mr Brinzo earned a
bachelor of science degree in business administration from Kent State
University and a master's degree in business administration from Case
Western Reserve University. Mr Brinzo is a member of the American Iron and
Steel Institute, and is Chairman of National Mining Association.
DAVID H. GUNNING joined Cliffs as vice chairman in 2001. Prior to joining
Cliffs, Mr Gunning was a consultant and private investor. Before that he
was President and Chief Executive Officer of Capitol American Financial
Corporation. For more than 25 years Mr Gunning was a partner in the law
firm of Jones, Day, Reavis & Pogue (now known as Jones Day), where he last
served as the partner in charge of the firm's world-wide corporate
practice. Mr Gunning earned a bachelor of arts degree from Cornell
University and received his law degree from Harvard University.
JOHN M. BEECH-JONES has extensive operations and management experience in
the iron ore industry. He joined Savage River Mines, Tasmania in 1967, and
occupied senior metallurgical and management roles within that
organisation, and with Wabush Mines in Northern Canada. He served as
Assistant General Manager at Savage River Mines from 1984 until 1997, then
became Senior Consultant to Cliffs' operations in Australia based in Perth
at that time. Mr Beech-Jones has continued his association with Cliffs on
a part-time basis since retiring in 2000. Mr Beech-Jones qualified with a
Higher National (Diploma) in chemistry at Flintshire College of Technology
in the United Kingdom before emigrating to Australia in 1964.
2.3 OVERVIEW OF CLIFFS AND ITS PRINCIPAL ACTIVITIES
History and operations
Founded in 1847, Cliffs is the largest producer of high-quality iron ore
pellets in North America and sells the majority of its pellets to
integrated steel companies in the United States and Canada. Cliffs is
listed on the NYSE.
Cliffs operates six iron ore mines located in Michigan, Minnesota and
Eastern Canada, which currently have the capacity to produce approximately
37 million tonnes of iron ore pellets annually. Based on Cliffs'
percentage ownership of the mines it operates, its share of the pellet
production capacity is currently approximately 23 million tonnes annually,
representing approximately 28% of total North American pellet capacity.
15
Cliffs sells its share of iron ore production pursuant to long term supply
agreements. Cliffs has repositioned itself from a manager of iron ore
mines on behalf of steel company owners to primarily a merchant of iron
ore to steel company customers and continues to seek additional investment
opportunities in iron ore mines. Cliffs has increased its ownership in
four of its six mines in recent years. This increased ownership has
allowed it to convert its mine partners into customers with long term
supply agreements. The increased mine ownership has also served to improve
the competitiveness of Cliffs' operations by allowing it to make operating
and capital decisions faster and more efficiently and enhancing its
ability to improve productivity, decrease production costs and
continuously improve pellet quality.
For the year ended 31 December 2003, Cliffs produced a total of 30.8
million tonnes of iron ore, including 18.4 million tonnes for its account
and 12.4 million tonnes on behalf of the steel company owners in the
mines. For the nine months ended 30 September 2004, Cliffs produced a
total of 25.6 million tonnes of iron ore, including 15.9 million tonnes
for its account and 9.7 million tonnes on behalf of the steel company
owners in the mines.
In December 2003, Cliffs partnered with Laiwu Steel Group of China to
acquire the assets of a bankrupt mine in Minnesota and to restart it under
the name United Taconite. Cliffs manages the mine which produces
approximately 5 million tonnes per annum. Laiwu (30% owner) and Cliffs
(70% owner) take their equity share of the mine's pellet production.
Through sales and trade agreements arranged by Cliffs, Laiwu receives
pellets from Cliffs' Wabush Mine in Canada to optimise shipping
efficiencies.
2.4 MAJOR SHAREHOLDERS OF CLIFFS
In excess of 85% of Cliffs' outstanding common shares are held by
institutional investors.
2.5 FINANCIAL INFORMATION REGARDING CLIFFS
On a consolidated basis, Cliffs reported total assets of US$895.2 million
(A$1,162.6 million) as at 31 December 2003, and a loss of US$32.7 million
(A$42.5 million) for the year ended 31 December 2003. For the nine month
period ended 30 September 2004 Cliffs reported total assets of US$1,092
million (A$1,418.2 million) and achieved an estimated after tax profit of
US$120.3 million (A$156.2 million).
2.6 PUBLIC ANNOUNCEMENTS BY CLIFFS AUSTRALIA IN RELATION TO THE OFFER
On 12 January 2005, Cliffs Australia and Portman made a joint public
announcement to the ASX in relation to the takeover offer for Portman. A
copy of this announcement is contained in Appendix 4 of this Bidder's
Statement.
2.7 PUBLICLY AVAILABLE INFORMATION
The shares of Cliffs are admitted to the official list of the NYSE. As
such, Cliffs is subject to the continuing reporting obligations of the
SEC. A substantial amount of information concerning Cliffs is publicly
available and may be accessed by referring to the company's website
(www.cleveland-cliffs.com) or the SEC website (www.sec.gov).
16
3 INFORMATION ON PORTMAN
3.1 DISCLAIMER
The following information on Portman securities has been prepared by
Cliffs Australia using publicly available information and certain
information provided to Cliffs Australia by Portman pursuant to a limited
due diligence investigation which Cliffs has conducted. This information
has not been independently verified. Accordingly, Cliffs Australia does
not, subject to the Corporations Act, make any representation or warranty,
express or implied, as to the accuracy or completeness of this
information.
The information on Portman in this Bidder's Statement should not be
considered comprehensive.
In addition, the Corporations Act requires the directors of Portman to
provide a Target's Statement to holders of Portman Shares in response to
this Bidder's Statement, setting out certain material information
concerning Portman. Portman's Target's Statement is set out in Section IV
of this booklet.
3.2 OVERVIEW OF PORTMAN AND ITS PRINCIPAL ACTIVITIES
Portman is a Western Australian based iron ore mining and exploration
company. Portman is listed on the ASX and its shares are traded on the
regulated unofficial market of the Frankfurt Stock Exchange. The Portman
Group's key assets are its 100% owned Koolyanobbing iron ore project
("KOOLYANOBBING"), located near Southern Cross in Western Australia, and
its 50% joint venture interest in the Cockatoo Island iron ore project.
KOOLYANOBBING (100% INTEREST)
The Koolyanobbing project is located 425 kilometres east of Perth and
approximately 50 kilometres north-east of the town of Southern Cross.
Koolyanobbing produces lump and fine iron ore with a current capacity of
approximately 5.4 million tonnes per annum. All of the ore mined is
transported by rail to the Port of Esperance, 578 kilometres to the south,
for shipment to Asian customers.
The capacity of the Koolyanobbing project is in the process of being
expanded to 8 million tonnes per annum. This expansion is primarily driven
by the development of the "Northern Tenements" iron ore resources at Mt
Jackson and Windarling, located 100 kilometres north of the existing
Koolyanobbing operations. The upgrade in expansion capacity is expected to
be completed by the fourth quarter of 2005.
At the expanded long-term production rate of 8 million tonnes per annum,
Koolyanobbing is expected to have a mine life of at least 13 years based
on a reserve estimate of 94.6 million tonnes at 62.26% iron purity from a
total resource of 150.9 million tonnes at 62.14% iron purity.
COCKATOO ISLAND (50% INTEREST)
Cockatoo Island is located off the Kimberley Coast of Western Australia,
approximately 3,000 kilometres north of Perth and is a 50:50 Joint Venture
with mining contracting group, Henry Walker Eltin. The project encompasses
high
17
grade, low impurity iron ore with mineral resources as at 30 June 2004
reported as 4.9 million tonnes at 68.17% iron purity.
3.3 DIRECTORS
As at the date of this Bidder's Statement, there are six directors of
Portman, namely:
- George Francis Jones, Non-executive Director and Chairman.
- Barry John Eldridge, Managing Director.
- Richard Knight, Non-executive Director.
- Michael Delaney Perrott, Non-executive Director.
- Fiona Elizabeth Harris, Non-executive Director.
- Malcolm Hugh Macpherson, Non-executive Director.
Profiles of the directors of Portman are provided in Annexure A of the
Target's Statement.
3.4 MAJOR SHAREHOLDERS
As at the Announcement Date the Barclays Group was the only person that
had lodged a substantial holding notice with Portman.
3.5 RECENT PORTMAN SHARE PRICE PERFORMANCE
The latest recorded sale price of Portman Shares on the ASX before the
public announcement of the Offer was A$3.05.
The latest recorded sale price of Portman Shares on the ASX before the
date on which this Bidder's Statement was lodged with ASIC was A$3.45.
The highest recorded sale price of Portman Shares on the ASX in the 12
months before the public announcement of the Offer was A$3.19.
The lowest recorded sale price of Portman Shares in the last 12 months
before this Bidder's Statement was lodged with ASIC was A$1.34.
Portman Shares have not traded above the Offer Price in the last 12 months
before the public announcement of the Offer.
The following graph sets out the share price of Portman Shares on the ASX
in the 12 months prior to the announcement of the Offer.
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[LINE GRAPH]
Source: IRESS Market Technology
3.6 FINANCIAL POSITION
Section 4 of the Target's Statement contains further information about the
recent financial position of the Portman Group.
3.7 PUBLICLY AVAILABLE INFORMATION
Portman is a company listed on the ASX and is subject to the periodic and
continuous disclosure requirements of the Corporations Act and the ASX
Listing Rules. Portman's annual report for the year ended 2003 was given
to the ASX on 22 April 2004.
Since 31 December 2003, Portman has made a number of announcements to the
ASX that may be relevant to its financial position. A brief description of
each announcement by Portman since 31 December 2003 is set out in Appendix
3 of this Bidder's Statement (a copy of each of these announcements may be
obtained from the ASX). Information (including copies of financial
statements) may also be obtained from Portman's website at
www.portman.com.au and from the ASX web site at www.asx.com.au.
19
4 CLIFFS AUSTRALIA'S INTENTIONS
4.1 OVERVIEW AND DISCLAIMER
This section sets out Cliffs Australia's intentions, on the basis of the
facts and information concerning Portman known to Cliffs Australia, in
relation to the following:
(a) the continuation of the business of Portman;
(b) any significant changes to be made to the business of Portman,
including any redeployment of the fixed assets of Portman; and
(c) the future employment of the present employees of Portman.
These intentions are based on the information concerning Portman, its
business and the general business environment which is known to Cliffs
Australia at the time of the preparation of this Bidder's Statement.
Cliffs Australia has reviewed information in the public domain concerning
Portman, its business, and the general business environment in which it
operates, and the limited information about Portman's business activities
made available to Cliffs Australia pursuant to its due diligence
investigations before the date of this Bidder's Statement. Based on its
review of that material, and on its current assessment of Portman's
operations, Cliffs Australia's intentions in relation to Portman are
summarised below. Statements set out in this section are statements of
current intentions only which may change as new information becomes
available or circumstances change.
Cliffs Australia's intentions as set out in this Bidder's Statement have
been approved by, and reflect the intentions of, Cliffs (its parent
company).
4.2 RATIONALE FOR THE OFFER
The proposed acquisition of Portman is a continuation of Cliffs' strategy
to broaden its scope as a supplier of iron ore to the global steel
industry through the acquisition of additional mining interests. Cliffs is
particularly focussed on expanding international investments to leverage
its expertise in mining and upgrading iron ore so that it may capitalise
on the demand for steel and iron ore in areas such as China and Japan.
Cliffs began selling iron ore into the China market in 2003 and has since
expanded sales to China through its partner Laiwu Steel. Portman has sales
offices in China and Japan and enjoys established customer relationships
with steel makers in both countries. Cliffs believes the acquisition of
Portman through the Offer will provide Cliffs with an immediate on the
ground presence in China, Japan and Australia, and a platform from which
to further expand its presence into China and elsewhere in Asia.
Given that Cliffs has no iron ore business in Australia, Cliffs Australia
intends (subject to the comments referred to below) to continue the
existing business of Portman which includes:
- the continued exploration within Portman's mineral leases;
- the mining of iron ore at Koolyanobbing and Cockatoo Island;
20
- the development of the Northern Tenements;
- the expansion of the Koolyanobbing production facilities; and
- the expansion of the capacity of the rail and Esperance Port
facilities.
4.3 STRATEGIC REVIEW
(a) General
As Cliffs Australia does not currently have access to all material
information, facts and circumstances necessary to assess the operational,
commercial, taxation and financial position of Portman, following the
close of the Offer, Cliffs Australia intends to undertake a detailed
review of Portman's business, assets and operations to evaluate their
performance, profitability, prospects and strategic relevance for Cliffs
Australia in light of the more detailed information then available to it,
and to determine business plans for their future with a view to improving
productivity and profitability. This may lead to the modification of some
of Portman's existing projects and activities, or the introduction of new
projects and new activities, although final decisions will only be reached
by Cliffs Australia after its strategic review and in light of all
material facts and circumstances.
(b) Non-duplication of functions
As noted above, Cliffs does not presently produce or supply iron ore from
Australia. Accordingly, whilst over the medium term Cliffs Australia
intends to explore achieving efficiencies across the Merged Group by
seeking to eliminate any duplication of functions where it is economically
efficient to do so, Cliffs Australia intends (subject to the
considerations outlined above) to continue operations at Portman's
existing mines and infrastructure facilities.
Cliffs has been impressed with the management of Portman in its dealings
with them to date. In addition, there are few synergies between the
operations of Cliffs and Portman. Therefore, Cliffs Australia presently
intends to continue the employment of all staff (subject to the strategic
review detailed in section 4.3(a) above).
4.4 INTENTIONS UPON ACQUIRING 90% OR MORE OF PORTMAN SHARES
It is Cliffs Australia's present intention, following the close of the
Offer, to control the board of directors of Portman and to acquire 100% of
Portman Shares and of all Portman Options.
This section sets out Cliffs Australia's intentions if it acquires 90% or
more of Portman Shares and is entitled to proceed to compulsory
acquisition of the outstanding Portman Shares.
(a) Compulsory Acquisition
If Cliffs Australia becomes entitled to do so under the Corporations
Act, Cliffs Australia intends to despatch notices seeking compulsory
acquisition of all outstanding Portman Shares and Portman Options in
accordance with the provisions of the Corporations Act.
21
(b) ASX Listing
At the conclusion of the compulsory acquisition process, Cliffs
Australia intends to procure the removal of Portman from the
official list of the ASX.
(c) Directors
Cliffs Australia will replace all members of the board of directors
of Portman with its own nominees.
(d) Strategic review and implementation of efficiencies
As mentioned in section 4.3(a) above, Cliffs Australia intends to
undertake a detailed strategic and operational review of Portman
following the close of the Offer. At present, as Cliffs does not
conduct an iron ore business in Australia, Cliffs Australia intends
(subject to the considerations outlined above) to continue
operations at Portman's existing mines and infrastructure
facilities.
4.5 INTENTIONS UPON ACQUISITION OF LESS THAN 90% OF PORTMAN SHARES
This section sets out Cliffs Australia's intentions if it were to declare
the Offer free from the 90% minimum acceptance condition without becoming
entitled to compulsorily acquire the outstanding Portman Shares but, by
virtue of acceptance of the Offer, Cliffs Australia were to gain effective
control of Portman.
Cliffs Australia reserves its right to declare the Offer free from the 90%
minimum acceptance condition (or any other condition) to the Offer,
although it has no present intention to do so.
In the event that Cliffs Australia declares the Offer free of the 90%
minimum acceptance condition without becoming entitled to proceed to
compulsory acquisition, but where Cliffs Australia gains effective control
of Portman, Cliffs Australia's current intentions are as set out below.
(a) ASX Listing
Cliffs Australia intends to maintain Portman's listing on the ASX,
provided requirements for listing (including a sufficient spread of
investors) are satisfied (although in this event the liquidity of
Portman Shares on the ASX is likely to be materially diminished).
(b) Directors
Subject to the Corporations Act and Portman's constitution, Cliffs
Australia intends to replace the members of the board of Portman
with nominees of Cliffs Australia and an appropriate number of
independent directors to represent minority shareholders.
Cliffs Australia has not made any decision about who would be
nominated for appointment to the board of Portman in this case.
22
Cliffs Australia intends that any nominee directors appointed to the
board of Portman will act at all times in accordance with their
fiduciary duties.
(c) Strategic review and implementation of efficiencies
Cliffs Australia, through its nominees on the Portman board, is
likely to propose that the intentions described in sections 4.3 and
4.4 above be implemented, to the extent that it is economically and
practically feasible, subject to the requirements of the Listing
Rules, the Corporations Act and any other applicable legislation.
(d) Dividends
Cliffs Australia, through its nominees on the Portman board, is
likely to propose that Portman review the dividend policy of Portman
having regard to any capital funding requirements of Portman
identified in its strategic review.
Cliffs Australia intends, through its nominees to the Portman board,
that Portman's dividend policy reflects a balance between ensuring
free cash flow is distributed to shareholders whilst ensuring that
adequate capital is maintained in the business to facilitate its
ongoing activities.
It is possible that no dividends will be payable in these
circumstances.
(e) Remaining Portman shareholders
If Cliffs Australia waives its minimum acceptance condition then
Portman shareholders should be aware that if they do not accept
Cliffs Australia's Offer they may become a `locked-in' minority (due
to the consequential effect on the liquidity and trading price of
Portman Shares) after the end of the Offer Period if Cliffs
Australia holds a majority of Portman Shares but is not entitled to
compulsorily acquire the remaining Portman Shares.
(f) Limitations on Intentions
Cliffs Australia would only make a decision on the above matters
following receipt of appropriate legal and financial advice. Cliffs
Australia's intentions must be read as being subject to the legal
obligation of Portman's directors, including any nominees of Cliffs
Australia, to have regard to the interests of Portman and all
Portman shareholders.
In particular, if Cliffs Australia obtains control (but not 100%) of
Portman, Cliffs Australia will be a "related party" of Portman
within the meaning of Chapter 2E of the Corporations Act and
consequently, within the meaning of the ASX Listing Rules. Cliffs
Australia's ability to implement its intentions would therefore be
subject to its obligations and the obligations of Portman to comply
with the applicable provisions of the Corporations Act and (provided
Portman remained listed) the ASX Listing Rules regarding related
party transactions.
4.6 INTENTIONS GENERALLY
Except for the changes and intentions set out in this section 4, Cliffs
Australia intends, based on the information presently known to it:
23
(a) to continue the businesses of Portman;
(b) not to make any major changes to the business of Portman or the
deployment of Portman's assets; and
(c) to continue the employment of Portman's employees.
24
5 INFORMATION ON PORTMAN SECURITIES
5.1 DISCLAIMER
The following information on Portman securities has been prepared by
Cliffs Australia using publicly available information and certain
information provided to Cliffs Australia by Portman. This information has
not been independently verified. Accordingly, Cliffs Australia does not,
subject to the Corporations Act, make any representation or warranty,
express or implied, as to the accuracy or completeness of such
information. In particular, some of the information in sections 5.2 and
5.3 is based on publicly available information which may not be complete.
Further information in relation to Portman's securities may be contained
in the Target's Statement.
5.2 PORTMAN SHARES ON ISSUE
Portman is listed on the ASX and its shares are traded on the regulated
unofficial market of the Frankfurt Stock Exchange.
According to information provided to Cliffs Australia by Portman, as at
the date of this Bidder's Statement, the total number of issued Portman
Shares is 175,680,073.
5.3 PORTMAN OPTIONS
The total number of Portman Options on issue which could be converted into
Portman Shares of an equivalent number, according to documents lodged by
Portman with the ASX as at 20 January 2005 is 4,388,433. The Portman
Options are not quoted and all are in-the-money (ie the price of the
underlying Portman Shares is greater than the exercise price of the
Portman Options).
EMPLOYEE SHARE OPTION PLAN
The ESOP was adopted by the shareholders of Portman on 8 April 1998 and is
the only option plan operated by Portman. Under the ESOP, Portman has
issued 1,117,667 Portman Options which are outstanding to eligible
employees (the "ESOP OPTIONS").
The outstanding ESOP Options were granted between 2 April 2001 and 25 June
2003 and have exercise prices ranging between A$1.153 and A$2.427. The
ESOP Options are exercisable at the end of one year from the grant date,
subject to satisfaction of certain performance hurdles, and expire five
years from the grant date.
If Cliffs Australia acquires more than 50% of Portman Shares then the
holders of ESOP Options may exercise any of those options at any time
during the six month period following the date the Offer becomes
unconditional (subject to the expiry date of those options).
DIRECTORS OPTIONS
Portman has issued options to directors ( the "DIRECTORS OPTIONS") that
are not issued under, but are subject to the rules of, the ESOP. There are
a total of 1,500,000 Directors Options which are outstanding.
25
All outstanding Directors Options were granted between 24 May 2001 and 19
April 2002 with exercise prices ranging between A$1.227 and A$2.427. The
options are exercisable at the end of one year from the grant date,
subject to satisfaction of certain performance hurdles, and expire five
years from the grant date.
If Cliffs Australia acquires more than 50% of Portman Shares then the
holders of Directors Options may exercise any of those options at any time
during the six month period following the date the Offer becomes
unconditional (subject to the expiry date of those options).
OTHER OPTIONS
Portman has issued options to certain consultants and to the managing
director of Portman (the "Non ESOP Options"). One option agreement is
subject to the ESOP rules, with the rest being entirely separate from the
ESOP. There are a total of 1,770,766 Non ESOP Options which are
outstanding.
All outstanding Non ESOP Options were granted between 29 January 2001 and
29 August 2003 with exercise prices ranging between A$1.031 and A$1.919.
The options granted subject to the ESOP rules are exercisable in tranches
on certain dates, subject to performance hurdles, and expire five years
from the grant date. The options which are entirely separate from the ESOP
are all currently exercisable, with no performance hurdles required to be
met, and expire five years from the grant date.
If Cliffs Australia acquires more than 50% of Portman Shares then the
holders of Non ESOP Options which are subject to the ESOP rules may
exercise any of those options at any time during the six month period
following the date the Offer becomes unconditional (subject to the expiry
date of those options).
5.4 CANCELLATION OF OPTIONS
Cliffs Australia and Portman intend to make individual proposals to each
holder of Portman Options to cancel their options in consideration, per
Portman Option, for the payment of A$3.40 less the relevant exercise price
of the Portman Option. The consideration for the cancellation will be
provided by Cliffs Australia.
The cancellation and payment of consideration will be subject to the
satisfaction or waiver of the following conditions:
(a) that each condition to which the Offer is subject is either
fulfilled or waived; and
(b) that Portman is removed from the official list of the ASX.
The Offer is conditional on the holders of 75% of the Portman Options
either exercising their options or entering into an Option Cancellation
Deed. The Option Cancellation Deed may be terminated by a holder of
Portman Options if a superior competing offer has been announced and
Cliffs Australia has not matched or exceeded that offer within seven
business days. Portman has advised Cliffs Australia that they anticipate
that all holders of Portman Options will enter into an Option Cancellation
Deed before the end of the Offer Period.
26
5.5 DETAILS OF RELEVANT INTERESTS IN PORTMAN SECURITIES
As at the date of this Bidder's Statement, and the date immediately before
the first Offer was sent, Cliffs Australia did not have a relevant
interest in any Portman Shares.
5.6 DETAILS OF VOTING POWER IN PORTMAN
Cliffs Australia did not have any voting power in Portman as at the date
of this Bidder's Statement or as at the date immediately before the first
Offer was sent.
5.7 CONSIDERATION PROVIDED FOR PORTMAN SECURITIES DURING PREVIOUS 4 MONTHS
Cliffs Australia and its associates have not acquired or disposed of
Portman Shares during the period of 4 months including on the day
immediately before the date of the Offer.
5.8 INDUCING BENEFITS GIVEN DURING PREVIOUS 4 MONTHS
Except as set out in this Bidder's Statement, neither Cliffs Australia nor
any of its associates has, during the period of 4 months ending on the day
immediately before the date of the Offer, given, offered or agreed to
give, a benefit to another person and the benefit was likely to induce the
other person, or an associate, to:
(a) accept an Offer; or
(b) dispose of Portman Shares,
which benefit was not offered to all holders of Portman Shares under the
Offer.
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6 FUNDING
6.1 MAXIMUM CASH CONSIDERATION
The consideration for the acquisition of Portman Shares to which the Offer
relates will be satisfied wholly in cash and, if all of the Offers are
accepted, will be approximately A$605 million (assuming all Portman
Options are exercised) or approximately A$597 million (assuming none of
the Portman Options are exercised).
(All figures above are calculated on the basis that cash payments by
Cliffs Australia to accepting shareholders are A$3.40 per Portman Share).
6.2 CLIFFS AUSTRALIA'S INTERNAL BORROWING ARRANGEMENTS
Cliffs has irrevocably and unconditionally undertaken to fund, or procure
that one of its wholly owned subsidiaries funds, Cliffs Australia (in
whatever form Cliffs Australia may require) with the total Australian
dollar cash consideration required to satisfy Cliffs Australia's
obligations under the Offer together with the consideration for the
cancellation of the Portman Options and amounts required to cover all
transaction costs associated with the Offer.
The right of Cliffs Australia to draw down funds cannot be revoked by
Cliffs and is not subject to any condition precedent.
6.3 CLIFFS' FINANCIAL RESOURCES
Cliffs has:
- cash funds totalling approximately US$400 million which are
immediately available to pay for the consideration for the
acquisition of all Portman Shares; and
- a firm commitment letter for a US$100 million 364 day revolving
credit facility (the "Facility") proposed to be provided by Fifth
Third Bank and Fleet National Bank (a Bank of America company).
The principal terms and conditions on which funds are to be made available
under the Facility are set out in a facility letter given by Fifth Third
Bank and Fleet National Bank to Cliffs and accepted by Cliffs.
Cliffs proposes to enter into full documentation with Fifth Third Bank and
Fleet National Bank in respect of the Facility as soon as practicable
after the date of this Bidder's Statement. The Facility replaces a US$30
million revolving credit facility which is currently in place and the
documentation will be on substantially the same terms as the existing
facility.
The Facility will be immediately available for drawdown on execution of
the Facility documentation and on satisfaction of the conditions precedent
to drawdown.
There will be no material conditions precedent to drawdowns under the
Facility. There is no reason currently known to Cliffs Australia why the
conditions precedent will not be able to be satisfied at any time at which
drawdown of the Facility will be required.
28
The Facility will also contain events of default, undertakings,
representations and warranties and other provisions usual for facilities
and arrangements of this nature. Cliffs Australia has no reason to believe
that any of the events of default will occur such that drawdowns will not
be able to be made.
The funds available from the Facility are not required for any operations
of the Cliffs Group.
The cash funds and the funds available from the Facility equate to
approximately A$650 million (based on an exchange rate of A$1 = US$0.77)
which is more than the amount required to fund the maximum consideration
payable pursuant to the Offer (assuming all Portman Options are exercised)
and all associated transaction costs, including advisers' fees.
29
7 AUSTRALIAN TAXATION CONSIDERATIONS
7.1 INTRODUCTION
The following is an outline of the principal Australian income tax
consequences generally applicable to a shareholder who disposes of Portman
Shares under the Offer. This outline reflects the current provisions of
the Income Tax Assessment Act 1936 (Cwlth) and the Income Tax Assessment
Act 1997 (Cwlth) and the regulations made under those Acts, and Cliffs
Australia's understanding of the current administrative practices of the
Australian Taxation Office. The outline does not otherwise take into
account or anticipate changes in the law, whether by way of judicial
decision or legislative action, nor does it take into account tax
legislation of countries apart from Australia.
The following outline is not exhaustive of all possible Australian income
tax considerations that could apply to particular shareholders. The
outline only applies to shareholders who hold their Portman Shares on
capital account. It does not apply to shareholders who hold their Portman
Shares in the course of a business of trading or dealing in such
securities or that may have acquired their Portman Shares as a result of
the exercise of any of the options referred to in section 5.3 above. The
taxation consequences of the Offer for those persons will depend on their
particular circumstances, and they should accordingly seek specialist
advice tailored to those circumstances.
The outline principally deals with shareholders that are residents of
Australia for tax purposes. Shareholders who are not resident in Australia
for tax purposes should take into account the tax consequences under the
laws of their country of residence, as well as under Australian law, of
acceptance of the Offer.
You are advised to consult with your own tax adviser regarding the
consequence of acquiring, holding or disposing of Portman Shares in light
of current tax laws and your particular investment circumstances.
7.2 TAXATION ON THE DISPOSAL OF PORTMAN SHARES
If you accept the Offer, you will be treated as having disposed of your
Portman Shares for Australian capital gains tax ("CGT") purposes. If for
any reason the Offer does not proceed, no disposal will occur and no CGT
implications should arise.
The CGT consequences arising on disposal of your Portman Shares will
depend on a number of factors including:
- if you acquired, or were deemed to have acquired, Portman Shares
prior to 20 September 1985 ("pre-CGT assets");
- if you choose to apply a CGT "discount percentage" to the disposal
of your Portman Shares;
- if you are a non-resident of Australia.
DISPOSAL OF PORTMAN SHARES THAT ARE pre-CGT assets
If you held Portman Shares which are pre-CGT assets you should not be
taxed on any capital gain you make on disposal of your Portman Shares. If
only some of your Portman Shares were pre-CGT assets, you should not be
taxed on any capital
30
gain on the disposal of such assets. Note, however, there are
circumstances where a shareholder which is a company or a certain type of
trust may be deemed to have acquired Portman Shares on or after 20
September 1985, so that such shares would not be pre-CGT assets but
instead would be considered "POST-CGT ASSETS". In this case, the
consequences described below for the disposal of Portman Shares that are
post-CGT assets would generally apply, subject to certain modifications to
the calculation of your cost base to reflect that the Shares have changed
from being pre-CGT assets to post-CGT assets. You should seek advice from
your taxation adviser as to the taxation implications of accepting the
Offer if these circumstances are relevant to you.
DISPOSAL OF PORTMAN SHARES THAT ARE POST-CGT ASSETS
Unless your Portman Shares are pre-CGT assets (see above), the following
consequences will apply to you.
You may make a capital gain or capital loss from acceptance of the Offer,
depending on whether the capital proceeds from the disposal of your
Portman Shares are greater than your cost base (or in some cases, the
indexed cost base) for those shares (a capital gain) or whether the
capital proceeds are less than your reduced cost base for those shares (a
capital loss).
The capital proceeds for the disposal of your Portman Shares will be the
purchase price of A$3.40.
The cost base of your Portman Shares would generally be the amount you
paid to acquire Portman Shares as well as costs associated with the
acquisition of your Portman Shares (such as brokerage).
If your Portman Shares were acquired at or before 11.45am on 21 September
1999, you have held your Portman Shares for at least 12 months before the
time of disposal and you are a shareholder who is an individual, a
complying superannuation entity, the trustee of certain trusts, or certain
other specified special entities, you may elect to adjust the cost base of
your Portman Shares to include indexation by reference to changes in the
Consumer Price Index from the calendar quarter in which Portman Shares
were acquired until the quarter ended 30 September 1999. Portman
shareholders which are companies will generally be entitled to include
that indexation adjustment without making an election if their Portman
Shares were acquired at or before 11.45am on 21 September 1999 and were
held for at least 12 months before the time of disposal.
Indexation adjustments are taken into account only for the purposes of
calculating a capital gain.
If you are an individual, a complying superannuation entity, the trustee
of certain trusts or certain other specified special entities and you
acquired Portman Shares at least 12 months before you sell them, then you
may be able to apply a CGT "discount percentage" to the disposal of
Portman Shares, provided that you have not or cannot elect to use
indexation of your cost base (as outlined above). The CGT discount
entitles the shareholder to reduce any net capital gain on the disposal of
Portman Shares (after deducting available capital losses of the
shareholder) either by half in the case of individuals and the trusts
mentioned above and by one-third in the case of complying superannuation
entities and certain other specified special entities. (However, trustees,
other than trustees of complying superannuation
31
entities, should seek specific advice regarding the tax consequences of
distributions attributable to discounted capital gains.) The tax law also
allows shareholders of certain listed companies to obtain benefits similar
to those conferred by discount capital gains. Portman shareholders which
are companies do not qualify for a CGT discount.
Capital gains and capital losses are aggregated to determine whether you
have made a net capital gain or net capital loss in the tax year in which
you are treated as having disposed of your Portman Shares. If there is a
net capital gain, then the amount of that net capital gain (after
application of any relevant CGT discount - see above) is included in your
assessable income.
A net capital loss cannot be deducted against assessable income earned in
that tax year or in any later tax year, but may be carried forward to be
offset against capital gains made in a later tax year. The CGT discount
does not apply to capital losses.
7.3 NON-RESIDENT SHAREHOLDERS
If you are a non-resident of Australia for tax purposes, you will
generally not have to pay Australian tax on any capital gain when you sell
or dispose of your Portman Shares (including by accepting the Offer),
provided that:
- you have not beneficially owned (together with associates) 10% or
more of the value of the issued capital of Portman within the five
year period before the disposal of Portman Shares; or
- Portman Shares are not held as an asset of a permanent establishment
which you have in Australia.
If you buy and sell shares in the ordinary course of business, or acquired
the shares for resale at a profit, you should seek your own Australian tax
advice.
You should also seek advice from your taxation adviser as to the taxation
implications of accepting the Offer in your country of residence.
7.4 STAMP DUTY
Any stamp duty payable on the transfer of Portman Shares to Cliffs
Australia pursuant to the Offer will be paid by Cliffs Australia.
32
8 ADDITIONAL INFORMATION
8.1 DUE DILIGENCE
For the purpose of confirming its assessment of whether or not to offer to
acquire all of Portman Shares, Cliffs Australia was given access by
Portman to certain information concerning Portman and it subsidiaries
which has not been disclosed generally to Portman shareholders. Except as
set out elsewhere in this Bidder's Statement, none of the information to
which Cliffs Australia was given access was, in the opinion of Cliffs
Australia, of such a nature and quality that, if the information were
generally available, a reasonable person would expect it to have a
material effect on the price or value of Portman Shares, or in the opinion
of Cliffs Australia and except as disclosed in this Bidder's Statement,
would otherwise be material to a decision by a Portman shareholder whether
or not to accept the Offer.
However, the fact that Cliffs Australia's decision to make the Offer was
confirmed by its review of the information to which it had access may
itself be regarded as information material to the decision by a Portman
shareholder whether or not to accept the Offer.
8.2 CHANGE OF CONTROL
COCKATOO ISLAND IRON ORE PROJECT
As noted in section 3.2 above, Portman has a 50% interest in a joint
venture with HWE Cockatoo Pty Ltd ("HWE") in respect of the Cockatoo
Island iron ore project. Portman's interest is held by a wholly owned
subsidiary, Portman Iron Ore Limited ("PORTMAN IRON").
The joint venture agreement contains a change of control provision which
will be triggered if Cliffs Australia acquires effective control of
Portman Iron as a result of the acquisition of more than 50% of Portman
Shares through the Offer. If the change of control occurs then HWE has the
option to acquire Portman Iron's interest in the joint venture at a price
to be mutually agreed between the parties, or as determined by an expert
in the absence of such agreement.
Cliffs Australia believes that the risk of HWE terminating the joint
venture agreement is low.
In addition, Portman Iron and HWE are parties to a sales agency agreement
under which Portman Iron acts as HWE's agent and representative worldwide
for the marketing, sale and distribution of its share of the iron ore
produced by the Cockatoo Island iron ore joint venture. This agreement
also contains a change of control provision which would allow HWE to
terminate the sales agency agreement if Cliffs Australia acquires 50% or
more of Portman Shares under the Offer without HWE's consent.
Cliffs Australia believes that the risk of HWE terminating the sales
agency agreement is low.
ESPERANCE PORT AUTHORITY OPERATING AGREEMENT
Portman Iron and Esperance Port Authority ("EPA") are parties to an
operating agreement under which EPA arranges and manages the unloading and
stockpiling of iron ore at the Esperance Port and loads it onto vessels
for shipment to Portman
33
Iron's customers. Portman and EPA are also parties to a deed of guarantee
and indemnity under which Portman guarantees the performance of Portman
Iron's obligations under the operating agreement.
The agreement and the deed of guarantee and indemnity each contain change
of control provisions which would allow EPA to terminate the operating
agreement if Cliffs Australia acquires effective control of Portman Iron
as a result of the acquisition of Portman Shares through the Offer without
EPA's consent.
It is intended that Cliffs will have discussions with the EPA. Cliffs has
no reason to believe that the EPA will terminate the agreement.
COMMONWEALTH BANK OF AUSTRALIA FACILITY
Portman has a A$40 million Multi-Option Facility Agreement with
Commonwealth Bank of Australia ("CBA"). The acquisition of more than 20%
of the shares in Portman by Cliffs Australia will trigger a change of
control provision in the facility agreement pursuant to which CBA may take
certain action, including terminating the facility and demanding repayment
of outstanding amounts.
If the Offer becomes unconditional, Cliffs Australia will discuss with CBA
whether it intends to exercise its termination right. Should CBA seek to
terminate the facility, Cliffs Australia intends to refinance the facility
with an alternative financial institution and does not anticipate any
difficulties in being able to do so.
8.3 ASIC MODIFICATIONS
Cliffs Australia has not obtained any modifications to or exemptions from
the Corporations Act from ASIC specifically for the Offer. Cliffs
Australia may rely on class order relief granted by ASIC.
8.4 CONDITIONS
The conditions of the Offer are set out in Appendix 2. In summary, these
conditions are:
- minimum acceptance of 90%;
- Foreign Investment Review Board approval;
- between the Announcement Date and the end of the Offer Period no
orders (or applications for orders) being made which restrain or
prohibit or materially adversely impact on the Offer, the completion
of any transaction contemplated by the Offer or the rights of Cliffs
Australia in respect of Portman Shares to be acquired under the
Offer, or which require the divestiture of shares or assets (other
than an application to or a determination by ASIC or the Takeovers
Panel in exercise of the powers and discretions conferred by the
Corporations Act or an action taken by those persons set out in
subsections 657G(2) and 659B(1) of the Corporations Act);
- between the Announcement Date and the end of the Offer Period no
specified event occurring that has or is reasonably likely to have a
material adverse effect on the circumstances of Portman or any of
its subsidiaries;
34
- no profit warnings made by Portman between the Announcement Date and
the end of the Offer Period;
- no material acquisitions, disposals or expenditure by Portman or any
of its subsidiaries between the Announcement Date and the end of the
Offer Period;
- no persons exercising rights under certain agreements or instruments
with Portman as a result of the acquisition of Portman Shares by
Cliffs Australia between the Announcement Date and the end of the
Offer Period;
- no decline in the S&P ASX 200 Index below 3,500 on any trading day
between the Announcement Date and the end of the Offer Period;
- no "prescribed occurrences" (being occurrences listed in section
652C of the Corporations Act) occurring in relation to Portman
between the Announcement Date and the end of the Offer Period; and
- agreements to cancel 75% of all of Portman Options being entered
into.
8.5 BROKER COMMISSION
Cliffs Australia will offer to pay a commission to brokers who solicit
acceptances of Cliffs Australia's Offer from their clients.
Any commission payments will be paid only in respect of parcels of Portman
Shares held by a shareholder who is not a broker or an associate of a
broker (determined at the discretion of Cliffs Australia).
Commission payments will not exceed 0.50% of the value of parcels of
Portman Shares held by shareholders who accept the Offer, and will be
subject to minimum payments (not exceeding A$50) and maximum payments (not
exceeding A$750) for each acceptance.
If a commission is offered, it will be payable to brokers only and subject
to the condition that no part of the fee will be able to be passed on or
paid to Portman shareholders. It is Cliffs Australia's intention that,
once an offer of commission has been made to any broker by Cliffs
Australia, the commission arrangement will remain in place for the balance
of the Offer Period and the amount of the commission offered will not be
increased during that period.
8.6 CONSENTS
This Bidder's Statement contains statements made by, or statements based
on statements made by, Cliffs. Cliffs has consented to the inclusion of:
(a) each statement it has made; and
(b) each statement which is based on a statement it has made,
in this Bidder's Statement in the form and context in which those
statements appear.
This Bidder's Statement contains a statement in section 5.4 based on a
statement made by Portman. Portman has consented to the inclusion of this
statement in this Bidder's Statement in the form and context in which that
statement appears.
35
This Bidder's Statement also includes statements which are in, or based on
statements made in, documents announced on the company announcements
platform of the ASX by Portman. Under the terms of ASIC Class Order
01/1543, the parties making those statements are not required to consent
to, and have not consented to, inclusion of those statements in this
Bidder's Statement.
As required by Class Order 01/1543, Cliffs Australia will make available a
copy of these documents (or of relevant extracts from this document), free
of charge to shareholders who request it during the Offer Period. To
obtain a copy of this document (or the relevant extracts), shareholders
may telephone the shareholder information line on 1800 24 23 00 (toll
free) (callers in Australia) or +61 2 9207 3622 (callers outside
Australia).
8.7 ARRANGEMENTS WITH PORTMAN
Cliffs and Portman have entered into an agreement pursuant to which:
(a) Cliffs has agreed via Cliffs Australia to make the Offer;
(b) the board of Portman has agreed:
(i) in the absence of a superior competing offer to recommend the
acceptance of the Offer by Cliffs Australia;
(ii) from the period from 11 January 2005 until the end of the
Offer Period not to solicit competing offers;
(iii) to advise Cliffs, subject to any applicable confidentiality
obligation binding on it, if a third party commences due
diligence in respect of Portman;
(iv) to pay Cliffs a break fee of A$6 million if:
(A) it fails to recommend the Offer in its Target's
Statement; or
(B) it adversely changes its recommendation; or
(C) a competing offeror becomes entitled to control of
Portman or its board of directors;
(c) Portman is not liable to pay the break fee if it adversely changes
its recommendation in circumstances where:
(i) there is a breach of a condition of the Offer other than as a
result of Portman's conduct and Cliffs Australia does not
waive its right to rely on the breach within seven business
days; or
(ii) a superior competing offer is made in respect of Portman's
shares but the maker of the offer does not acquire control of
Portman; and
(d) the parties agreed to a joint dispatch of the Target's Statement
with the Bidder's Statement within 14 days following the
Announcement Date.
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8.8 OTHER MATERIAL INFORMATION
Except as set out elsewhere in this Bidder's Statement, the Target's
Statement and the information contained in Portman's releases to ASX prior
to the date of the Target's Statement there is no other information that
is:
(a) material to the making of a decision by a shareholder whether or not
to accept an Offer; and
(b) known to Cliffs Australia,
and has not previously been disclosed to the shareholders.
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9 GLOSSARY
9.1 DEFINITIONS
The following defined terms are used throughout this Bidder's Statement
unless the contrary intention appears or the context requires otherwise:
ACCEPTANCE FORM means the form of acceptance and transfer accompanying
this Offer.
ANNOUNCEMENT DATE means 12 January 2005, being the date of announcement of
the Offer.
ASIC means Australian Securities and Investments Commission.
ASTC means the ASX Settlement and Transfer Corporation Pty Limited (ABN 49
008 504 532), the body which administers the CHESS system in Australia.
ASTC SETTLEMENT RULES means the settlement rules of ASTC.
ASX means Australian Stock Exchange Limited.
BIDDER'S STATEMENT means this document, being the statement of Cliffs
Australia under Part 6.5 Division 2 of the Corporations Act relating to
the Offers.
BROKER means a person who is a share broker and a participant in CHESS.
BUSINESS DAY means a day on which banks are open for general banking
business in Sydney and Perth (not being a Saturday, Sunday or public
holiday in that place).
CHESS means the Clearing House Electronic Subregister System, which
provides for electronic share transfer in Australia.
CHESS HOLDING means a holding of Portman Shares on the CHESS subregister
of Portman.
CONTROLLING PARTICIPANT means the Broker or Non-Broker Participant who is
designated as the controlling participant for shares in a CHESS Holding in
accordance with the ASTC Settlement Rules.
CORPORATIONS ACT means the Corporations Act 2001 (Cwlth).
CLIFFS means Cleveland-Cliffs Inc a company incorporated in Cleveland,
Ohio USA.
CLIFFS AUSTRALIA means Cleveland-Cliffs Australia Pty Ltd (ACN 112 437
180) a company incorporated in Australia.
CLIFFS GROUP means Cliffs and its subsidiaries.
ESOP means Portman's Employee Share Option Plan described in section 5.3
above.
ISSUER SPONSORED HOLDING means a holding of Portman Shares on Portman's
issuer sponsored subregister.
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LISTING RULES means the listing rules of ASX.
MERGED GROUP means Cliffs and its subsidiaries following the acquisition
by Cliffs Australia of all or a majority of Portman Shares.
NON-BROKER PARTICIPANT means a non-broker participant under the ASTC
Settlement Rules.
NYSE means New York Stock Exchange.
OFFER PERIOD means the period commencing on 24 January 2005 and ending on
25 February 2005, or such later date to which the Offer has been extended.
OFFER PRICE means A$3.40 per Portman Share.
OFFER TERMS means the terms and conditions of the Offers set out in
Appendices 1 and 2 to this Bidder's Statement.
OFFERS means the offers by Cliffs Australia on the Offer Terms to acquire
Portman Shares referred to in Appendix 1 of this Bidder's Statement and
Offer shall be construed accordingly.
OPTION CANCELLATION DEED means an agreement between Cliffs Australia,
Portman and each holder of Portman Options to cancel Portman Options.
PORTMAN means Portman (ABN 22 007 871 892), a company incorporated in
Australia.
PORTMAN GROUP means Portman and each of its subsidiaries.
PORTMAN IRON means Portman Iron Ore Limited, a subsidiary of Portman.
PORTMAN OPTIONS means the options described in section 5.3 of this
Bidder's Statement and any other options to subscribe for the issue of
Portman Shares.
PORTMAN SHARES means fully paid ordinary shares in the capital of Portman.
PUBLIC AUTHORITY means any governmental, semi-governmental,
administrative, fiscal, judicial or quasi-judicial body, department,
commission, authority, tribunal, agency or entity.
RIGHTS means all accretions, rights or benefits of whatever kind attaching
to or arising from Portman Shares directly or indirectly after the
Announcement Date, including, without limitation, all dividends or other
distributions and all rights to receive any dividends or other
distributions, or to receive or subscribe for shares, stock units, notes,
bonds, options or other securities, declared, paid or made by Portman or
any of its subsidiaries.
SEC means the United States Securities and Exchange Commission.
TONNE means a metric tonne.
9.2 GENERAL INTERPRETATION
The following rules of interpretation apply unless the contrary intention
appears or the context requires otherwise:
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(a) A reference to time is a reference to Perth, Australia time.
(b) Headings are for convenience only and do not affect interpretation.
(c) The singular includes the plural and conversely.
(d) A reference to a section is to a section of this Bidder's Statement.
(e) A gender includes all genders.
(f) Where a word or phrase is defined, its other grammatical forms have
a corresponding meaning.
(g) $, A$ or cents is a reference to the lawful currency in Australia,
unless otherwise stated.
(h) US$ is a reference to the lawful currency in the United States.
(i) A reference to a person includes a body corporate, an unincorporated
body or other entity and conversely.
(j) A reference to a person includes a reference to the person's
executors, administrators, successors, substitutes (including, but
not limited to, persons taking by novation) and assigns.
(k) A reference to any legislation or to any provision of any
legislation includes any modification or re-enactment of it, any
legislative provision substituted for it and all regulations and
statutory instruments issued under it.
(l) A reference to any instrument or document includes any variation or
replacement of it.
(m) A term not specifically defined in this Bidder's Statement has the
meaning given to it (if any) in the Corporations Act or the ASTC
Settlement Rules, as the case may be.
(n) A reference to a right or obligation of any two or more persons
confers that right, or imposes that obligation, as the case may be,
jointly and individually.
(o) A reference to you is to a person to whom the Offer is made under
Appendix 1 to this Bidder's Statement.
(p) A$/US$ conversions have been effected at an exchange rate of A$1 =
US$0.77.
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10 APPROVAL OF THE BIDDER'S STATEMENT
A copy of this Bidder's Statement that is to be lodged with ASIC has been
approved by a resolution passed by the directors of Cliffs Australia on 20
January 2005.
Signed by John M Beech-Jones of Cliffs Australia in accordance with
section 351 of the Corporations Act.
Director Date: 21 January 2005
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Appendix 1 - Formal terms of the Offer
1 OFFERS
Cliffs Australia offers to acquire all of your Portman Shares together
with all Rights attaching to them on the following terms and conditions.
The Offer extends to any Portman Shares that are issued during the Offer
Period as a result of the exercise of Portman Options.
You may only accept this Offer for all of your Portman Shares.
By accepting this Offer, you undertake to transfer to Cliffs Australia not
only Portman Shares to which the Offer relates but also all Rights
attached to Portman Shares.
2 CONSIDERATION
The consideration offered for each Portman Share is A$3.40 cash.
3 OFFER PERIOD
The Offer will, unless withdrawn, remain open for acceptance during the
period commencing on the date of this Offer, being 24 January 2005, and
ending at 7pm (Perth time) on:
(a) 25 February 2005; or
(b) any date to which the period of this Offer is extended in accordance
with the Corporations Act,
whichever is the later.
4 HOW TO ACCEPT THIS OFFER
4.1 ALL OF YOUR HOLDING
This Offer is for all of your Portman Shares.
4.2 ACCEPTANCE PROCEDURE FOR PORTMAN SHAREHOLDERS
The acceptance procedure will depend on whether your Portman Shares are in
a CHESS Holding or an Issuer Sponsored Holding.
IF YOU HOLD YOUR PORTMAN SHARES IN A CHESS HOLDING
You must comply with the ASTC Settlement Rules.
If you are a sponsored CHESS Holder of Portman Shares, you may:
- instruct your stockbroker or Controlling Participant to initiate
acceptance of the Offer on your behalf in accordance with Rule 14.14
of the ASTC Settlement Rules; or
42
- send the completed Acceptance Form directly to your stockbroker or
Controlling Participant; or
- complete the Acceptance Form and mail or deliver it to the address
below and authorise Cliffs Australia to instruct your stockbroker or
Controlling Participant to initiate acceptance of the Offer on your
behalf before the end of the Offer Period.
IF YOU HOLD YOUR PORTMAN SHARES IN AN ISSUER SPONSORED HOLDING
If your Portman Shares are in an Issuer Sponsored Holding, then to accept
this Offer you must COMPLETE, SIGN AND RETURN the accompanying Acceptance
Form in accordance with the instructions on it and deliver it or send it
by post together with all other documents required by those instructions
so that they are received before the expiry of the Offer Period.
MAILING AND DELIVERY ADDRESSES
The mailing and delivery addresses for completed Acceptance Forms are as
follows.
The mailing address is:
Computershare Investor Services Pty Limited
GPO Box 7045
SYDNEY NSW 2001
Alternatively you may deliver the Acceptance Form and any associated
documents by hand to:
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
SYDNEY NSW 2001
A reply paid envelope (not able to be used by shareholders outside
Australia) is enclosed for your convenience.
ACCEPTANCE FORM
The Acceptance Form which accompanies this Offer forms part of it. The
requirements on the Acceptance Form must be observed in accepting this
Offer in respect of your Portman Shares.
4.3 ACCEPTANCE PROCEDURE FOR HOLDERS OF PORTMAN OPTIONS
If you hold Portman Options on the date of this Offer, and if you are
entitled to and wish to exercise Portman Options during the Offer Period
and accept the Offer, you may return the completed Acceptance Form and a
signed notice of exercise of your Portman Options to the delivery or
mailing addresses set out in clause 4.2 above. If you do so, and you do
not pay Cliffs Australia the exercise price in respect of those Portman
Options, Cliffs Australia will pay you the consideration that would
otherwise have been payable to you in respect of Portman Shares issued on
exercise less the exercise price in respect of those Portman Options.
4.4 POWER OF ATTORNEY, DECEASED ESTATE
When accepting this Offer, you should also forward for inspection:
43
(a) if the Acceptance Form is executed by an attorney, the power of
attorney; and
(b) if the Acceptance Form is executed by the executor of a will or the
administrator of the estate of a deceased shareholder, the relevant
Grant of Probate or Letters of Administration.
4.5 WHEN ACCEPTANCE IS COMPLETE
Acceptance of this Offer will not be complete until the completed
Acceptance Form has been received as set out in clause 4.2 above and the
requirements of this clause have been met, provided that:
(a) Cliffs Australia may in its sole discretion waive any or all of
those requirements at any time; and
(b) where such requirements have been complied with in respect of some
but not all of your Portman Shares, Cliffs Australia may, in its
sole discretion, deem your acceptance of this Offer complete in
respect of those Portman Shares for which the requirements have been
complied with but not in respect of the remainder.
5 PAYMENT OF CONSIDERATION
5.1 HOW CONSIDERATION IS PAID
The consideration payable by Cliffs Australia to you in respect of your
Portman Shares may be paid at the sole discretion of Cliffs Australia as
follows:
(a) Cliffs Australia may pay so much of the consideration as is required
to discharge any debt owed by you to Portman, or any other party,
whether under the terms of any employee incentive scheme or
otherwise and Cliffs Australia will pay to you the remaining
consideration by cheque; or
(b) Cliffs Australia will pay to you the consideration for your Portman
Shares by cheque.
5.2 WHEN CONSIDERATION IS PAID
Subject to clause 5.3, if the contract resulting from your acceptance of
this Offer becomes unconditional, Cliffs Australia will provide the
consideration to which you are entitled on acceptance of this Offer on or
before the earlier of:
(a) one month after the date this Offer is validly accepted by you or,
if the Offer is subject to a defeating condition when accepted,
within one month after this Offer or the contract resulting from
your acceptance of this Offer becomes unconditional; and
(b) 21 days after the end of the Offer Period.
5.3 WHERE ADDITIONAL DOCUMENTS ARE REQUIRED
Where the Acceptance Form requires additional documents to be given with
your acceptance (such as a power of attorney):
(a) if the documents are given with your acceptance, Cliffs Australia
will provide the consideration in accordance with clause 5.2;
44
(b) if the documents are given after acceptance and before the end of
the Offer Period and the Offer is subject to a defeating condition
at the time that Cliffs Australia is given the documents, Cliffs
Australia will provide the consideration by the end of whichever
period ends earlier:
(i) within one month after the contract resulting from your
acceptance of the Offer becomes unconditional; and
(ii) 21 days after the end of the Offer Period;
(c) if the documents are given after acceptance and before the end of
the Offer Period and the Offer is unconditional at the time that
Cliffs Australia is given the documents, Cliffs Australia will
provide the consideration by the end of whichever period ends
earlier:
(i) one month after Cliffs Australia is given the document; and
(ii) 21 days after the end of the Offer Period; or
(d) if the documents are given after the end of the Offer Period, Cliffs
Australia will provide the consideration within 21 days after the
documents are given; but if at the time Cliffs Australia is given
the documents, the contract resulting from your acceptance of the
Offer is still subject to one or more of the conditions in paragraph
(c) of Appendix 2, Cliffs Australia will provide the consideration
within 21 days after that contract becomes unconditional.
If you do not provide Cliffs Australia the required additional documents
within one month after the end of the Offer Period, Cliffs Australia may,
in its sole discretion, rescind the contract resulting from your
acceptance of the Offer.
5.4 WHERE CLIFFS AUSTRALIA IS ENTITLED TO ANY RIGHTS
If Cliffs Australia becomes entitled to any Rights on acceptance of this
Offer, you must give Cliffs Australia all documents that Cliffs Australia
needs to give Cliffs Australia title to those Rights. If you do not give
those documents to Cliffs Australia, or if you have received the benefit
of those Rights, Cliffs Australia will deduct from the consideration
otherwise due to you the amount (or value, as reasonably assessed by
Cliffs Australia) of those Rights.
5.5 PAYMENT TO BE MAILED BY CHEQUE
Payment of the cash amount to which you are entitled will be mailed by
cheque (or otherwise as agreed by Cliffs Australia) in Australian
currency. Cheques will be sent to the address on the Acceptance Form by
pre-paid ordinary mail or, if you have an overseas address, by pre-paid
airmail.
5.6 CLEARANCES FOR OFFSHORE RESIDENTS
If, at the time of acceptance of this Offer, you are resident in or of a
place outside Australia, you will not be entitled to receive any
consideration under this Offer until all requisite authorities or
clearances of the Reserve Bank of Australia (whether under the Banking
(Foreign Exchange) Regulations or otherwise), or of the Australian
Taxation Office, have been obtained.
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6 CONDITIONS OF THE OFFER
6.1 CONDITIONS
This Offer and the contract that results from acceptance of this Offer are
subject to fulfilment of the conditions set out in Appendix 2.
6.2 NATURE OF CONDITIONS
Each of the conditions set out in each paragraph and subparagraph of
Appendix 2:
(a) constitutes and will be construed as a separate, several and
distinct condition;
(b) is a condition subsequent with the exception of the condition
specified in paragraph (b) of Appendix 2, which is a condition
precedent; and
(c) until the expiration of the Offer Period (or in the case of the
conditions referred to in paragraph (i) (prescribed occurrences) of
Appendix 2, until three business days after the end of the Offer
Period) will be for the benefit of Cliffs Australia alone and may be
relied upon only by Cliffs Australia.
6.3 FOREIGN ACQUISITIONS AND TAKEOVERS ACT
The condition specified in paragraph (b) of Appendix 2 is a condition
precedent. Any contract resulting from acceptance of this Offer will not
become binding unless and until the condition in paragraph (b) of Appendix
2 is fulfilled. Cliffs Australia intends not to waive this condition.
6.4 EFFECT OF BREACH OR NON-FULFILMENT
The breach or non-fulfilment of any of the conditions subsequent set out
in Appendix 2 does not, until the end of the Offer Period, prevent a
contract arising to acquire your Portman Shares resulting from your
acceptance of this Offer but, if at the end of the Offer Period (or, in
the case of the conditions in paragraph (i) of Appendix 2, at the end of
three business days after the end of the Offer Period), in respect of any
condition in Appendix 2:
(a) Cliffs Australia has not declared the Offers (and they have not
become) free from that condition; or
(b) that condition has not been fulfilled,
all contracts resulting from the acceptance of the Offers and all
acceptances that have not resulted in binding contracts are void. In such
a case, Cliffs Australia will return the Acceptance Form together with all
documents to the address shown in the Acceptance Form and notify ASTC of
the lapse of the Offers in accordance with Rule 14.9 of the ASTC
Settlement Rules.
6.5 BEST ENDEAVOURS IN RELATION TO CONDITIONS
Cliffs Australia and its related bodies corporate will each:
(a) use their best endeavours to procure that each of the conditions in
Appendix 2 is satisfied; and
(b) not do or omit to do anything which may cause a breach of any such
condition.
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6.6 CLIFFS AUSTRALIA MAY DECIDE OFFER IS FREE FROM ALL OR ANY OF THE
CONDITIONS
Cliffs Australia may at any time at its sole discretion but in compliance
with section 650F and section 630(1) of the Corporations Act, declare the
Offers free from all or any of the conditions set out in each paragraph
and subparagraph of Appendix 2 by notice in writing to Portman:
(a) in the case of the conditions referred to in paragraph (i) of
Appendix 2 - not later than three business days after the end of the
Offer Period; or
(b) in any other case - not later than seven days before the end of the
Offer Period.
6.7 DATE FOR GIVING NOTICE ON STATUS OF CONDITIONS
The date for giving a notice on the status of the conditions as required
by section 630(1) of the Corporations Act is 17 February 2005, subject to
variation in accordance with section 630(2) of the Corporations Act in the
event that the Offer Period is extended.
6.8 EFFECT OF ACCEPTANCE
By signing and returning the Acceptance Form, you will be deemed to have:
(a) irrevocably authorised Cliffs Australia to alter the Acceptance Form
on your behalf by:
(i) inserting correct details of your Portman Shares;
(ii) filling in any blanks remaining on the Acceptance Form; and
(iii) rectifying any errors in, and omissions from, the Acceptance
Form,
as may be necessary to make the Acceptance Form a valid acceptance
of this Offer and to enable registration of the transfer of your
Portman Shares to Cliffs Australia; and
(b) if any of your Portman Shares are in a CHESS Holding, irrevocably
authorised Cliffs Australia to:
(i) instruct your Controlling Participant to initiate acceptance
of this Offer in respect of all such Portman Shares in
accordance with the ASTC Settlement Rules; and
(ii) give any other instructions in relation to those Portman
Shares to your Controlling Participant on your behalf under
the sponsorship agreement between you and the Controlling
Participant; and
(c) (including where the Offer is caused to be accepted in accordance
with the ASTC Settlement Rules):
(i) irrevocably accepted this Offer in respect of all your Portman
Shares despite any difference between that number and the
number of Portman Shares shown in the Acceptance Form;
(ii) represented and warranted to Cliffs Australia, as a condition
of the contract resulting from your acceptance of the Offer,
that at the time of acceptance and at the time of transfer to
Cliffs Australia:
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(A) you have paid to Portman all amounts which are due for
payment in respect of your Portman Shares; and
(B) all of your Portman Shares are fully paid and free from
all mortgages, charges, liens and other encumbrances of
any nature; and
(C) you have full power and capacity to sell and transfer
those Portman Shares;
(iii) on this Offer or any takeover contract becoming unconditional,
irrevocably appointed Cliffs Australia and each of its
directors from time to time severally as your agent and
attorney on your behalf to:
(A) attend and vote in respect of your Portman Shares at all
general meetings of Portman;
(B) at Cliffs Australia's discretion, pay Portman, or any
other party, all or part of any amounts contemplated by
clause 5.1(a) of these terms;
(C) receive from Portman or any other party, and retain, any
share certificates which were held by Portman, or any
other party, whether pursuant to the terms of any
employee incentive scheme (including, without
limitation, any employee share scheme) or otherwise; and
(D) sign all documents (including an instrument appointing
one of Cliffs Australia's directors as a proxy in
respect of any or all of your Portman Shares and any
application to Portman for a replacement certificate in
respect of any share certificate which has been lost or
destroyed) and resolutions relating to your Portman
Shares, and generally to exercise all powers and rights
which you may have as a shareholder and perform such
actions as may be appropriate in order to vest good
title in your Portman Shares in Cliffs Australia, and to
have agreed that, in exercising such powers, any such
director is entitled to act in Cliffs Australia's
interests as the beneficial owner and intended
registered holder of your Portman Shares; and
(iv) if at the time of acceptance of this Offer your Portman Shares
are in a CHESS Holding, authorised, with effect from the date
that this Offer or any contract resulting from acceptance of
this Offer is declared free from all its conditions or those
conditions are satisfied, Cliffs Australia to cause a message
to be transmitted to ASTC in accordance with Rule 14.17.1 of
the ASTC Settlement Rules so as to transfer your Portman
Shares to Cliffs Australia's Takeover Transferee Holding.
Cliffs Australia will be so authorised even though at the time
of such transfer it has not paid the consideration due to you
under this Offer.
Except in relation to Portman Shares in a CHESS Holding, Cliffs Australia
may at any time deem the receipt of a signed Acceptance Form to be a valid
acceptance of
48
this Offer even though you omit to include your share certificate(s) (if
any) or there is not compliance with any one or more of the other
requirements for acceptance but, if Cliffs Australia does so, Cliffs
Australia is not obliged to make the consideration available to you until
all of the requirements for acceptance have been met.
6.9 WITHDRAWAL
Cliffs Australia may withdraw unaccepted Offers at any time with the
written consent of ASIC and subject to the conditions (if any) specified
in such consent.
6.10 VARIATION
Cliffs Australia may vary this Offer in accordance with the Corporations
Act.
7 ACCEPTANCES BY TRANSFEREES AND NOMINEES
7.1 WHO MAY ACCEPT THE OFFER
During the Offer Period:
(a) any person who is able to give good title to a parcel of your
Portman Shares may accept (if they have not already accepted an
offer in the form of this Offer) as if an offer on terms identical
with this Offer has been made to them; and
(b) any person who holds one or more parcels of Portman Shares as
trustee, nominee, or otherwise on account of another person, may
accept as if a separate offer had been made in relation to:
(i) each of those parcels; and
(ii) any parcel they hold in their own right.
7.2 HOLDING SHARES
A person is taken to hold Portman Shares if the person is, or is entitled
to be registered as, the holder of those Portman Shares.
7.3 HOLDING SHARES ON TRUST OR AS A NOMINEE
A person is taken to hold Portman Shares on trust for, as nominee for, or
on account of, another person if they:
(a) are entitled to be registered as the holder of particular Portman
Shares; and
(b) hold their interest in Portman Shares on trust for, as nominee for,
or on account of, that other person.
7.4 EFFECTIVE ACCEPTANCE
An acceptance of an offer under clause 7.1(b) is ineffective unless:
(a) the person who holds on account of another person, gives that other
person a notice stating that Portman Shares consist of a separate
parcel; and
(b) the acceptance specifies the number of Portman Shares in that
parcel.
49
7.5 NOTICE OF ACCEPTANCE
A notice under clause 7.4(a) of these terms must be made:
(a) if it relates to Portman Shares entered on an ASTC subregister - in
an electronic form approved by the ASTC Settlement Rules; or
(b) otherwise - in writing.
A person may, at the one time, accept for two or more parcels under this
clause as if there had been a single offer for a separate parcel
consisting of those parcels.
8 OTHER MATTERS
8.1 NOTICES AND OTHER COMMUNICATIONS
Subject to the Corporations Act, a notice or other communication given by
Cliffs Australia to you in connection with this Offer shall be deemed to
be duly given if it is in writing and:
(a) is delivered at your address as recorded on the register of members
of Portman or the address shown in the Acceptance Form; or
(b) is sent by pre-paid ordinary mail, or in the case of an address
outside Australia by pre-paid airmail, to you at either of those
addresses.
8.2 RETURN OF DOCUMENTS
If:
(a) this Offer is withdrawn after your Acceptance Form has been sent to
Cliffs Australia, but before it has been received; or
(b) for any other reason Cliffs Australia does not acquire Portman
Shares to which your Acceptance Form relates,
Cliffs Australia will despatch at your risk your Acceptance Form together
with all other documents forwarded by you, to your address as shown on the
Acceptance Form or such other address as you may notify in writing to
Cliffs Australia by, where such address is inside Australia, pre-paid
ordinary post, or, where such address is outside Australia, pre-paid
airmail.
9 COSTS AND EXPENSES
All costs and expenses of the preparation, despatch and circulation of the
Offers and all stamp duty payable in respect of a transfer of Portman
Shares in respect of which Offers are accepted, will be paid by Cliffs
Australia.
50
Appendix 2 - Conditions of the Offer
The Offers and any contracts resulting from acceptance of the Offers are
subject to fulfilment of the following conditions:
(a) (MINIMUM ACCEPTANCE) that during, or at the end of, the Offer Period
Cliffs Australia has acquired a relevant interest in at least 90%
(by number) of Portman Shares;
(b) (FOREIGN ACQUISITIONS AND TAKEOVERS ACT) the Treasurer of the
Commonwealth of Australia consents, on an unconditional basis, under
the Foreign Acquisitions and Takeovers Act 1975 (Cwlth) ("ACT") to
the proposed acquisition by Cliffs Australia of Portman and the
Treasurer is taken to have so consented:
(i) if Cliffs Australia receives written advice from or on behalf
of the Treasurer to the effect that the acquisition of Portman
is not inconsistent with the Australian Government's foreign
investment policy or is not objected to under the Act; or
(ii) if notice of the proposed acquisition of Portman is given to
the Treasurer and the Treasurer has ceased to be empowered to
make any order under Part II of the Act in relation to the
proposed acquisition because of lapse of time;
(c) (NO RESTRAINING ORDERS) that between the Announcement Date and the
end of the Offer Period:
(i) there is not in effect any preliminary or final decision,
order or decree issued by a Public Authority; and
(ii) no application is made to any Public Authority (other than by
any member of the Cliffs Group), or action or investigation is
announced, threatened or commenced by a Public Authority,
in consequence of, or in connection with, the Offer (other than an
application to or a determination by ASIC or the Takeovers Panel in
exercise of the powers and discretions conferred by the Corporations
Act or an action taken by those persons set out in subsections
657G(2) and 659B(1) of the Corporations Act), which:
(iii) restrains or prohibits (or if granted could restrain or
prohibit), or otherwise materially adversely impacts on, the
making of the Offer or the completion of any transaction
contemplated by the Offer (whether subject to conditions or
not) or the rights of Cliffs Australia in respect of Portman
and Portman Shares to be acquired under the Offer; or
51
(iv) requires the divestiture by Cliffs Australia of any Portman
Shares, or the divestiture of any assets of Portman Group, the
Cliffs Group or otherwise;
(d) (NO MATERIAL ADVERSE EFFECT) that no specified event occurs that
will, or is reasonably likely to, have a material adverse effect on
the assets and liabilities, financial position and performance,
profits and losses or prospects of Portman and its subsidiaries,
including as a result of making the Offers or the acquisition of
Portman Shares pursuant to the Offers. For these purposes, a
"specified event" is:
(i) an event or occurrence that occurs between the Announcement
Date and the end of the Offer Period;
(ii) an event or occurrence that occurs before the Announcement
Date but is only announced or publicly disclosed between the
Announcement Date and the end of the Offer Period; or
(iii) an event or occurrence that will or is likely to occur
following the Offer Period and which has not been publicly
announced prior to the Announcement Date;
(e) (PORTMAN EARNINGS) between the Announcement Date and the end of the
Offer Period there being no profit warning made by Portman under its
ASX continuous disclosure obligations;
(f) (NO MATERIAL ACQUISITIONS, DISPOSALS OR NEW COMMITMENTS) except for
any proposed transaction publicly announced by Portman before the
Announcement Date, none of the following events occurs during the
period from the Announcement Date to the end of the Offer Period:
(i) Portman or any subsidiary of Portman acquires, offers to
acquire or agrees to acquire one or more companies, businesses
or assets (or any interest in one or more companies,
businesses or assets) for an amount in aggregate greater than
$5 million or makes an announcement in relation to such an
acquisition, offer or agreement;
(ii) Portman or any subsidiary of Portman disposes of, offers to
dispose of or agrees to dispose of one or more companies,
businesses or assets (or any interest in one or more
companies, businesses or assets) for an amount, or in respect
of which the book value (as recorded in Portman's statement of
financial position as at 30 June 2004) is, in aggregate,
greater than $5 million or makes an announcement in relation
to such a disposition, offer or agreement;
(iii) Portman or any subsidiary of Portman enters into, or offers to
enter into or agrees to enter into, any agreement, joint
venture, partnership, management agreement or commitment which
would require expenditure, or the foregoing of revenue, by
Portman and/or its subsidiaries of an amount which is, in
aggregate, more than $1 million, other than in the ordinary
course of business, or makes an announcement in relation to
such an entry, offer or agreement;
52
(g) (NO PERSONS EXERCISING RIGHTS UNDER CERTAIN AGREEMENTS OR
INSTRUMENTS) after the Announcement Date and before the end of the
Offer Period, no person exercises or purports to exercise, or states
an intention to exercise, any rights under any provision of any
agreement or other instrument to which Portman or any subsidiary of
Portman is a party, or by or to which Portman or any subsidiary of
Portman or any of its assets may be bound or be subject, which
results, or could result, to an extent which is material in the
context of Portman or Portman and its subsidiaries taken as a whole,
in:
(i) any monies borrowed by Portman or any subsidiary of Portman
being or becoming repayable or being capable of being declared
repayable immediately or earlier than the repayment date
stated in such agreement or other instrument;
(ii) any such agreement or other instrument being terminated or
modified or any action being taken or arising thereunder;
(iii) the interest of Portman or any subsidiary of Portman in any
firm, joint venture, trust, corporation or other entity (or
any arrangements relating to such interest) being terminated
or modified; or
(iv) the business of Portman or any subsidiary of Portman with any
other person being adversely affected,
as a result of the acquisition of Portman Shares by Cliffs
Australia;
(h) (INDEX DECLINE) that between the Announcement Date and the end of
the Offer Period the S&P ASX 200 Index does not fall below 3,500 on
any trading day;
(i) (PRESCRIBED OCCURRENCES) that between the Announcement Date and the
end of the Offer Period, none of the following events happen:
(i) Portman converts all or any of its shares into a larger or
smaller number of shares;
(ii) Portman or a subsidiary resolves to reduce its share capital
in any way;
(iii) Portman or a subsidiary:
(A) enters into a buy-back agreement; or
(B) resolves to approve the terms of a buy-back agreement
under section 257C(1) or section 257D(1) of the
Corporations Act;
(iv) Portman or a subsidiary issues shares, or grants an option
over its shares, or agrees to make such an issue or grant such
an option;
(v) Portman or a subsidiary issues, or agrees to issue,
convertible notes;
(vi) Portman or a subsidiary disposes, or agrees to dispose, of the
whole, or a substantial part, of its business or property;
53
(vii) Portman or a subsidiary charges, or agrees to charge, the
whole, or a substantial part, of its business or property;
(viii) Portman or a subsidiary resolves to be wound up;
(ix) a liquidator or provisional liquidator of Portman or of a
subsidiary is appointed;
(x) a court makes an order for the winding up of Portman or of a
subsidiary;
(xi) an administrator of Portman or of a subsidiary is appointed
under sections 436A, 436B or 436C of the Corporations Act;
(xii) Portman or a subsidiary executes a deed of company
arrangement; or
(xiii) a receiver or a receiver and manager is appointed in relation
to the whole, or a substantial part, of the property of
Portman or of a subsidiary;
(j) (CANCELLATION OF OPTIONS) the holders of 75% of the Portman Options
on issue either exercising their options or entering into an Option
Cancellation Deed in respect of all Portman Options held by them.
54
Appendix 3 - Portman's announcements to the ASX since 31 December 2003
DATE ANNOUNCEMENT
- ---------- -------------------------------------------------------------------
20/01/2005 Portman announced the cancellation of employee options previously
issued under the company's ESOP
20/01/2005 Portman released its quarterly report for the period ended 31
December 2004
13/01/2005 Portman announced the issue of 67,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
12/01/2005 Cleveland-Cliffs and Portman announced that Cleveland-Cliffs,
through its wholly owned subsidiary Cliffs Australia, intended to
make an off market cash takeover offer for Portman shares
10/01/2005 Portman announced a trading halt pending an announcement by the
company
07/01/2005 Portman announced the cancellation of employee options previously
issued under the company's ESOP
22/12/2004 Consolidated Minerals Limited ceased to be a substantial holder in
Portman
17/12/2004 Consolidated Mineral Limited announced a reduction in its
substantial holding from 14.81% to 12.81%
02/12/2004 Portman announced the issue of 105,000 ordinary fully paid shares
as a result of the exercise of options under the ESOP
04/11/2004 Portman announced the issue of 37,830 ordinary fully paid shares as
a result of the exercise of 37,830 options
03/11/2004 Portman lodged an open briefing regarding the expansion of the
Koolyanobbing iron ore operation to 8 million tonnes per annum
28/10/2004 Portman announced the issue of 59,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
26/10/2004 Portman released its Quarterly Report for the period ended 30
September 2004
18/10/2004 Portman announced its approval for a $55 million expansion of its
Koolyanobbing operations to increase its iron ore production to 8
million tonnes per annum
23/09/2004 Portman announced the issue of 376,667 ordinary fully paid shares
as a result of the exercise of options under the ESOP
16/09/2004 Portman announced that a seawall at Cockatoo Island had sustained
damage from unexpected slippage. The company announced that
September and October shipments would not be affected by the
slippage.
16/09/2004 Portman announced a trading halt pending an announcement by the
company
10/09/2004 Portman released its Concise Half Yearly Report to shareholders for
the six months to 30 June 2004
09/09/2004 Portman announced the issue of 77,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
55
DATE ANNOUNCEMENT
- ---------- -------------------------------------------------------------------
08/09/2004 UBS Nominees Pty Ltd and its related bodies corporate ceased to be
a substantial holder in Portman
06/09/2004 Consolidated Mineral Limited announced an increase in its
substantial holding from 9.8% to 14.8%
03/09/2004 Portman lodged change of director's interest notices following the
exercise of:
- 1,750,000 options by George Francis Jones
- 500,000 options by Barry John Eldridge
- 500,000 options by Michael Delaney Perrott
03/09/2004 Portman announced the issue of 37,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
03/09/2004 Portman announced the issue of 3,250,000 ordinary paid shares as a
result of the exercise of 3,250,000 directors options
02/09/2004 Portman lodged an open briefing regarding the results published in
its Half Yearly Report to 30 June 2004
30/08/2004 Portman announced the record date of 5pm 20 September 2004 for
determination of a fully franked interim dividend of 4.5 cents per
share
30/08/2004 Portman releases its Half Yearly Report and Half Yearly Accounts
for the half year ended 30 June 2004
12/08/2004 Portman announced the issue of 67,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
05/08/2004 Portman announced the issue of 200,000 ordinary fully paid shares
as a result of the exercise of 200,000 directors options
29/07/2004 Portman announced the issue of 46,667 ordinary fully paid shares as
a result of the exercise of options under the ESOP
23/07/2004 Portman announced that profit outcome for the 6 months to 30 June
2004 would be higher than market expectation
22/07/2004 Portman announced the issue of 300,000 ordinary paid shares as a
result of the exercise of 300,000 directors options
20/07/2004 Portman released its Quarterly Report for the period ended 30 June
2004 and announced its new production record
19/07/2004 The increase of Barclays Group's substantial holding was announced
16/07/2004 Consolidated Minerals Limited announced an increase in its
substantial holding from 7.85% to 9.8%
14/07/2004 Barclays Group announced an increase in its substantial holding
from 5.01% to 7.08%
05/07/2004 Sun Hung Kai Investment Services Limited (Mega Harvest Resources
Limited's Account) ceased to be a substantial holder in Portman
01/07/2004 Consolidated Minerals Limited became a substantial holder in
Portman
01/07/2004 Consolidated Minerals Limited announced the purchase of 7.85% of
Portman
01/07/2004 Portman announced the acquisition by Consolidated Minerals Limited
of approximately 13.8 million shares in Portman from Sung Hung Kai
Investment Services Limited (the custodian for Mega Harvest
Resources Ltd, a wholly owned subsidiary of China Online)
30/06/2004 Portman announced the cancellation of 448,460 ordinary shares
bought back as part of the On-Market Share Buy Back process in the
period 28 April 2004 to 11 May 2004
56
DATE ANNOUNCEMENT
- ---------- -------------------------------------------------------------------
24/06/2004 Barclays Group became a substantial holder in Portman with 5.01%
18/06/2004 Portman announced the cancellation of its listing on AIM with
effect from 31 July 2004
17/06/2004 Portman announced its decision to delist from the New Zealand
Exchange Limited
24/05/2004 Portman lodged revised terms of options amended pursuant to a
waiver from listing rule 6.23.4
19/05/2004 Portman lodged an open briefing regarding takeover speculation as a
result of a new substantial shareholder China Online (Bermuda)
Limited
19/05/2004 Portman lodged an open briefing regarding outlook for 2004
11/05/2004 Portman lodged a daily share buy-back notice in respect of 200,000
shares for a total consideration of A$328,000
10/05/2004 Portman lodged a daily share buy-back notice in respect of 50,000
shares for a total consideration of A$80,500
10/05/2004 Sun Hung Kai Investment Services Limited (Mega Harvest Resources
Limited's Account) announced an increase in its substantial holding
from 6.65% to 7.48%
07/05/2004 Portman lodged a daily share buy-back notice in respect of 54,812
shares for a total consideration of A$87,151
05/05/2004 Portman gave a presentation to institutional shareholders and
stockbrokers on the:
- company's financial results
- Koolyanobbing project
- Mt Jackson and Windarling Tenements
- Cockatoo Island project
- world iron ore market
- China factor and outlook
05/05/2004 Sun Hung Kai Investment Services Limited (Mega Harvest Resources
Limited's Account) announced an increase in its substantial holding
from 5.34% to 6.65%
04/05/2004 Portman announced the cancellation of 3,326,677 ordinary shares
bought back as part of the On-Market Share Buy Back process
04/05/2004 Portman lodged a daily share buy-back notice in respect of 100,000
shares for a total consideration of A$151,000
03/05/2004 Portman lodged a daily share buy-back notice in respect of 43,648
shares for a total consideration of A$65,472
03/05/2004 Sun Hung Kai Investment Services Limited (Mega Harvest Resources
Limited's Account) becomes a substantial holder in Portman
30/04/2004 Portman announced the outcome in respect of each resolution put to
the annual general meeting on 30 April 2004. All resolutions were
passed including to re-elect directors, to increase the fees
payable to the directors and the appointment of Ernst & Young as
the company's auditor.
30/04/2004 Portman lodged copies of the chairman's address to the annual
general meeting held on 30 April 2004
29/04/2004 Portman announced the finalisation of the Koolyanobbing North
Access Agreement with Western Areas NL
57
DATE ANNOUNCEMENT
- ---------- -------------------------------------------------------------------
27/04/2004 Portman lodged a daily share buy-back notice in respect of 450,000
shares for a total consideration of A$675,000
23/04/2004 Portman lodged a daily share buy-back notice in respect of 75,000
shares for a total consideration of A$112,500
22/04/2004 Portman released its Annual Report for the year ended 31 December
2003 and lodged its notice of annual general meeting to be held on
30 April 2004
21/04/2004 Portman lodged a daily share buy-back notice in respect of 375,000
shares for a total consideration of A$558,750
20/04/2004 Portman released its Quarterly Report for the period ended 31 March
2004
15/04/2004 Portman lodged a daily share buy-back notice in respect of 350,000
shares for a total consideration of A$512,000
15/04/2004 Portman announced the issue of 23,334 ordinary fully paid shares as
a result of the exercise of options under the ESOP
14/04/2004 Portman lodged a daily share buy-back notice in respect of 300,000
shares for a total consideration of A$445,000
13/04/2004 Portman lodged a daily share buy-back notice in respect of
1,000,000 shares for a total consideration of A$1,514,152.50
13/04/2004 Portman lodged a daily share buy-back notice in respect of 388,105
shares for a total consideration of A$581,927.60
07/04/2004 Portman lodged a daily share buy-back notice in respect of 4,885
shares for a total consideration of A$7,376.35
05/04/2004 Portman lodged a daily share buy-back notice in respect of 113,887
shares for a total consideration of A$170,835.50
02/04/2004 Portman lodged a daily share buy-back notice in respect of 246,853
shares for a total consideration of A$369,008.97
01/04/2004 Portman lodged a daily share buy-back notice in respect of 22,947
shares for a total consideration of A$34,191.03
31/03/2004 Portman announced the issue of 83,000 ordinary fully paid shares as
a result of the exercise of options under the ESOP
29/03/2004 Portman lodged an open briefing regarding profits for 2003, outlook
and expansion plans
25/03/2004 Portman announced the issue of 300,000 ordinary fully paid shares
as a result of the exercise of 300,000 directors options
15/03/2004 Portman announced 10% on-market Share Buy Back
12/03/2004 Pelican Resources Limited provided an update that the boards of
Henry Walker Eltin Group Limited and Portman approved the
continuation of the operations at Cockatoo Island
11/03/2004 Portman announced an offer to 500 holders of unmarketable parcels
of company shares
08/03/2004 Portman announced the record date of 5pm 7 April 2004 for
determination of a fully franked final dividend of 4 cents per
share
04/03/2004 Portman released its preliminary final report and full year
accounts for the period to 31 December 2003
20/02/2004 ING Australia Holdings Limited and related companies ceased to be a
substantial holder in Portman
19/02/2004 Australia and New Zealand Banking Group Limited ceased to be a
substantial holder in Portman
58
DATE ANNOUNCEMENT
- ---------- -------------------------------------------------------------------
16/02/2004 Australia and New Zealand Banking Group Limited announced a
reduction in its substantial holding from 6.95% to 5.60%
16/02/2004 ING Australia Holdings Limited and related companies announced a
reduction in their substantial holding from 7.51% to 6.20%
09/02/2004 Portman announced its upgrade of the Mineral Resources and Ore
Reserves of the Koolyanobbing Project and its expansion plans
04/02/2004 ING Australia Holdings Limited and related companies announced a
reduction in their substantial holding from 8.66% to 7.51%
03/02/2004 Australia and New Zealand Banking Group Limited announced a
reduction in its substantial holding from 8.29% to 6.95%
23/01/2004 Portman announced that is share registry address was changing to
the address of Advanced Share Registry Services
20/01/2004 Portman released its Quarterly Report for the period ended 31
December 2003
59
Appendix 4 - Joint announcement made on 12 January 2005
[CLEVELAND-CLIFFS LOGO] [PORTMAN LOGO]
12 January 2005
CLEVELAND-CLIFFS AND PORTMAN ANNOUNCE AGREED OFFER FOR PORTMAN
PERTH, AUSTRALIA 12 JANUARY, 2005 AND CLEVELAND, USA -- CLEVELAND-CLIFFS INC
(NYSE:CLF) the largest producer of high-quality iron ore pellets in North
America and PORTMAN LIMITED (ASX: PMM), an Australian listed independent iron
ore mining and exploration company, announce that Cleveland-Cliffs (through its
wholly owned subsidiary Cleveland-Cliffs Australia Pty Ltd) intends to make an
off market cash takeover offer for all of the shares in Portman.
Cleveland-Cliffs will also seek to acquire all the Portman unlisted options on
issue.
The offer has the unanimous support of the Portman board and, in the absence of
a superior offer, the Portman board will be recommending that Portman
shareholders accept the offer.
All the Portman directors have indicated that in the absence of a superior offer
they intend to accept the offer with respect to their own shareholdings.
THE OFFER FROM CLEVELAND-CLIFFS
The consideration offered to Portman shareholders will be A$3.40 CASH per
ordinary share valuing Portman at approximately A$605 million (US$465 million at
an exchange rate of A$1 = US$0.77). Separate to the share offer,
Cleveland-Cliffs plans to enter into individual agreements with each option
holder to cancel their options in consideration for the payment of the net of
the offer price of $A3.40 per share and the exercise price of the option.
The offer represents:
- a 43.9% premium to the volume weighted average price for the six
months to 7 January 2005 (the last trading day before Portman
requested a trading halt on 10 January 2005);
- a 25.2% premium to the volume weighted average price for the three
months to 7 January;
- a 21.8% premium to the volume weighted average price for the month
to 7 January 2005; and
- an 11.5% premium to the closing price of Portman shares on 7 January
2005.
Recent changes to stamp duty legislation in Western Australia have had the
consequence that an acquirer of more than 90% of the shares in Portman is likely
to have to pay duty of approximately 5.4%. For Cleveland-Cliffs, this will
increase the cost of the acquisition by approximately A$28.3 million (some 16
cents per Portman share).
60
Cleveland-Cliffs' offer will be subject to 90% acceptance and a number of
conditions as outlined in Annexure 3.
Portman has agreed to pay a break fee of 1% of the bid consideration if the
board of Portman withdraws its recommendation of the bid in the absence of a
superior competing offer or if a competing offeror acquires control of Portman
(a more detailed explanation of the break fee arrangements is included in
Annexure 3).
Commenting today, Mr John Brinzo, Chairman and Chief Executive Officer of
Cleveland-Cliffs said:
"For Cleveland-Cliffs shareholders this transaction presents us with an
opportunity to achieve one of our key strategic objectives of acquiring an
established business in Australia from which to develop our global business,
particularly into Asia."
"The offer represents Cleveland-Cliffs' optimistic view of the value of
Portman's shares."
"For Portman shareholders, our offer provides an opportunity to realise the
value of their Portman shareholdings at a time when the price fully reflects the
recent surge in iron ore prices to a 10 year cyclical high."
Under the proposal, Portman shareholders would not bear any brokerage charges or
stamp duty if they accept into the offer.
PORTMAN BOARD RECOMMENDATION
Commenting on the offer, Portman's Chairman, George Jones, said that the Portman
board believes that Cleveland-Cliffs' offer is attractive and should be
acceptable to Portman shareholders in the absence of a superior offer.
"The iron ore market is enjoying a buoyant period with producers and equity
analysts optimistic that a material price increase will flow from the current
round of iron ore price negotiations," Mr Jones said.
Given the potentially attractive short term pricing outcomes that may emerge
from the current round of iron ore price negotiations, the Portman board, in
determining whether the offer reflects fair value for Portman shareholders, gave
consideration to a range of possible price outcomes both in the short term and
in the longer term. In addition, in forming a view on fair value, the Portman
board also took into account exchange rates, operational risks and opportunities
that Portman faces, the exploration potential of its assets and the
prospectivity of other growth options Portman would have as an independent
company.
"While our analysis involved an assessment of the future based on uncertain
outcomes, the Portman board concluded unanimously that, within a range of
reasonable assumptions, the offer was fair," Mr Jones said.
The Portman board also considered the adequacy of the control premium that
Cleveland-Cliffs is offering. At the offer price, many Portman shareholders will
have enjoyed substantial capital gains of almost 150% during the last year.
61
This recent significant uplift in value combined with a number of other relevant
factors led the board to conclude that the premium was acceptable. Those factors
included the fact that:
1. Cleveland-Cliffs will not be able to unlock material synergies, the
value of which might otherwise have been shared with Portman
shareholders;
2. the premium to market was appropriate given that the offer fairly
values Portman shares; and
3. in addition to normal transaction costs (eg. financing and advisory
fees) the total acquisition cost for Cleveland-Cliffs will increase
by approximately 5.4% (some 16 cents per share) because of stamp
duty which is not payable in any other Australian state apart from
Western Australia.
"For all of these reasons, we welcome the offer from Cleveland-Cliffs and intend
to recommend that our shareholders accept it in the absence of a superior
offer," Mr Jones said.
"We have commenced work on the preparation of our Target's Statement which we
will be despatching to our shareholders as soon as possible. Shareholders should
wait until they receive the Bidder's and Target's Statements before they take
any action in relation to their Portman shares."
Cleveland-Cliffs and Portman intend to jointly despatch the Bidder's and
Target's Statements within the next 14 days.
Cleveland-Cliffs will duly notify the Foreign Investment Review Board (FIRB) in
Australia of its proposal to acquire Portman Limited.
Cleveland-Cliffs is being advised by Wilson HTM Corporate Finance Limited in
Australia and Hill Street Capital LLC in North America.
Portman is being advised by Gresham Advisory Partners Limited.
INDICATIVE TIMETABLE
- - Late January - Early February Lodgement and despatch of Bidder's and
Target's Statement to Portman shareholders
and opening of Cleveland-Cliffs offer
- - Late February Possible first closing date for Cleveland-
Cliffs offer
62
FOR FURTHER INFORMATION PLEASE CALL:
CLEVELAND-CLIFFS
Media - Australia Kate Kerrison
Kate Kerrison + Company
(0413) 946 704
kate@katekerrison.com.au
Financial Community - Australia Wayne Seabrook
Wilson HTM
(02) 8247 6600
wayne.seabrook@wilsonhtm.com.au
Media - United States Dana Byrne
Cleveland-Cliffs
Vice President - Public Affairs
+1 (216) 694 4870
Financial Community - United States Don Gallagher
Chief Financial Officer
Cleveland-Cliffs
+1 (216) 694.5459
PORTMAN
Media Barry Eldridge or George Jones
Portman
(08) 9426 3333
Jan Hope and Nicholas Read
Jan Hope and Partners
(08) 9388 1474
jan@janhope.com.au
WWW.CLEVELAND-CLIFFS.COM
WWW.PORTMAN.COM,AU
References in this news release to "Cleveland-Cliffs" and "Company" include
subsidiaries and affiliates as appropriate in the context.
This news release contains predictive statements that are intended to be
"forward-looking" within the safe harbour protections of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
forward-looking statements are based on reasonable assumptions, such statements
are subject to risk and uncertainties. There can be no assurance that the offer
to acquire the shares of Portman Limited will be accepted or that a superior
offer will not emerge or any transaction completed. Actual results may differ
materially from statements for a variety of factors, such as changes in demand
and/or prices for iron ore pellets by North American integrated steel producers,
or changes in Asian iron ore demand and/or pricing, due to changes in steel
utilization rates, operational factors, electric furnace production or imports
of semi-finished steel or pig iron (affecting estimated pellet sales, mine
operations, or projected liquidity requirements); changes in the financial
condition of the Company's partners and/or customers; rejection of major
contracts and/or venture agreements by customers and/or
63
participants underprovisions of the U.S. Bankruptcy Code or similar statutes in
other countries; events or circumstances that could impair or adversely impact
the viability of a mine and the carrying value of associated assets; inability
of planned capacity expansions to achieve expected additional production;
increases in the cost or length of time required to complete the expansions;
failure to receive required environmental permits for or otherwise implement
planned capital expansions; problems with productivity, labour disputes, weather
conditions, fluctuations in ore grade, tons mined, changes in cost factors
including energy costs, and employee benefit costs; the success of the Company
in identifying and realizing growth opportunities; the Company's ability to
continue to pay quarterly cash dividends in such amounts as the Directors may
determine in light of other uses for such funds; and the effect of these various
risks on the Company's future cash flows, debt levels, liquidity and financial
position. Reference is made to the detailed explanation of the many factors and
risks that may cause such predictive statements to turn out differently, set
forth in the Company's Annual Report for 2003, Reports on Form 10-K and Form
10-Q and previous news releases filed with the Securities and Exchange
Commission, which are publicly available on Cleveland-Cliffs' website. The
information contained in this document speaks as of the date of this news
release and may be superseded by subsequent events.
ANNEXURE 1: BACKGROUND ON CLEVELAND-CLIFFS INC
Cleveland-Cliffs Inc, headquartered in Cleveland, Ohio, U.S.A., is the largest
producer of iron ore pellets in North America and sells the majority of its
pellets to integrated steel companies in the United States and Canada. The
Company operates six iron ore mines located in Michigan, Minnesota and Eastern
Canada.
Today, Cleveland-Cliffs' six North American pellet plants account for 45 percent
of North American capacity and production for its own account amounts to 28
percent of North American capacity.
Cleveland-Cliffs has cash totalling approximately US$400 million (approximately
A$500 million) and no debt. In addition, the Company has a commitment for a
US$100 million revolving credit facility (all of which is undrawn) to supplement
the all-cash acquisition.
ANNEXURE 2: BACKGROUND ON PORTMAN MINING LIMITED
Portman Limited, an independent iron ore mining and exploration company, is
Australia's third largest producer of iron ore. The company services the Asian
iron ore markets with direct-shipping fines and lump ore from its 100%-owned
Koolyanobbing Iron Ore Project, and its 50% joint-venture interest in the
Cockatoo Island Iron Ore Project, both located in Western Australia. Portman's
current annualized production is approximately six million tons per year and it
currently has an A$55 million project underway that is expected to increase
production to eight million tons per year by 2006. The expanded level of
production is fully committed to steel companies in China and Japan for the next
several years.
Portman's reserves currently total 94.6 million tonnes, with the Koolyanobbing
Project slated to produce for the next 13 years. Additionally, Portman has an
active exploration program underway to increase reserves. Portman's revenues for
the year ended December 31, 2004, are estimated to be approximately A$200
million, or approximately US$156 million.
64
ANNEXURE 3: OFFER CONDITIONS AND BREAK FEE
Cleveland-Cliffs' offer will be subject to a number of conditions summaries of
which are set out below:
- minimum acceptance of 90%;
- Foreign Investment Review Board approval;
- between 12 January 2005 (the Announcement Date) and the end of the
Offer Period no orders (or applications for orders) being made which
restrain or prohibit or materially adversely impact on the Offer,
the completion of any transaction contemplated by the Offer or the
rights of Cleveland-Cliffs in respect of Portman Shares to be
acquired under the Offer, or which require the divestiture of shares
or assets;
- between the Announcement Date and the end of the Offer Period no
specified event occurring that has or is reasonably likely to have a
material adverse effect on the circumstances of Portman or any of
its subsidiaries;
- no profit warnings made by Portman between the Announcement Date and
the end of the Offer Period;
- no material acquisitions, disposals or expenditure by Portman or any
of its subsidiaries between the Announcement Date and the end of the
Offer Period;
- no persons exercising rights under agreements or instruments with
Portman as a result of the acquisition of shares in Portman by
Cleveland-Cliffs after the Announcement Date and before the end of
the Offer Period;
- no decline in the S&P ASX 200 Index below 3,500 on any trading day
between the Announcement Date and the end of the Offer Period;
- no "prescribed occurrences" (being occurrences listed in section
652C of the Corporations Act) occurring in relation to Portman
between the Announcement Date and the end of the Offer Period; and
- agreements to cancel 75% of all of Portman Options being entered
into.
Portman has agreed to pay a break fee to Cleveland-Cliffs of A$6 million (being
1% of the offer consideration) in the event that:
(a) it fails to recommend the Offer in its target statement; or
(b) it adversely changes its recommendation; or
(c) a competing offeror becomes entitled to control of Portman or its
board of directors.
65
Portman is not liable to pay the break fee if it adversely changes its
recommendation in circumstances where:
(a) there is a breach of a condition of the Offer other than as a result
of Portman's conduct and Cleveland-Cliffs does not waive its right
to rely on the breach within 7 business days; or
(b) a superior competing offer is made in respect of Portman's shares
but the maker of the offer does not acquire control of Portman.
Portman has also agreed with Cleveland Cliffs that during the period from 11
January 2005 until the end of the Offer Period under the takeover bid Portman
will not solicit competing offers for Portman.
66
TARGET'S STATEMENT
[PORTMAN LOGO] PORTMAN LIMITED
(ABN 22 007 871 892)
THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT AS TO HOW TO DEAL WITH IT PLEASE CONSULT YOUR FINANCIAL OR OTHER
PROFESSIONAL ADVISER.
67
PLEASE NOTE
This Target's Statement is dated 21 January 2005 and is given by Portman under
Part 6.5 of the Corporations Act in response to Cliffs Australia's Bidder's
Statement and Offer.
You should read this Target's Statement in its entirety.
A number of defined terms are used in this Target's Statement. These terms are
capitalised and their meanings are explained in section 9 of this Target's
Statement.
All references to time in this Target's Statement are to Perth, Western
Australia, time. All amounts are in Australian dollars unless otherwise stated.
IMPORTANT DATES
Date of Offer 24 January 2005
Date of this Target's Statement 21 January 2005
Closing date of Offer 7pm (Perth time) on
25 February 2005 unless extended or
withdrawn
ASIC
A copy of this Target's Statement was lodged with ASIC on 21 January 2005. ASIC
does not take any responsibility for the contents of this Target's Statement.
INVESTMENT DECISIONS
This Target's Statement does not take into account the individual investment
objectives, financial situation or particular needs of each Portman Shareholder
or any other person. You should seek your own independent financial and taxation
advice before deciding whether or not to accept the Offer for your Portman
Shares.
INFORMATION LINE AND WEBSITE
If you have any queries in relation to the Offer you can call the shareholder
information line during Perth business hours on 1800 24 23 00 (for Australian
callers) or + 61 2 9207 3622 (for international callers). In accordance with
legal requirements, calls to the shareholder information line will be recorded.
Further information relating to the Offer can also be obtained from Portman's
website at www.portman.com.au
68
DISCLAIMER AS TO FORWARD LOOKING STATEMENTS
This Target's Statement contains forward looking statements. Such statements are
only predictions and are subject to inherent risks and uncertainties. Those
risks and uncertainties include factors and risks specific to the mining
industry (and iron ore mining in particular) as well as general economic
conditions and conditions in the financial markets. Actual events or results may
differ materially from the events or results expressed or implied in any forward
looking statement and such deviations are both normal and to be expected. None
of Portman, any of its officers, or any person named in this Target's Statement
with their consent or any person involved in the preparation of this Target's
Statement makes any representation or warranty (either express or implied) as to
the accuracy or likelihood in any forward looking statement, and you are should
not place undue reliance on these statements.
The forward looking statements in this Target's Statement reflect views held
only as at the date of this Target's Statement.
69
1. BACKGROUND
1.1 BACKGROUND ON PORTMAN
Portman is an ASX listed company involved in the supply of iron ore to the
Chinese and Japanese markets. Approximately 75% of Portman's product is
exported to China and 25% to Japan. Portman's position in the world market
as a niche player has been won through strong marketing skills and strong
management culture.
Portman's main assets are the:
- Koolyanobbing Project in Western Australia with current iron ore
production of around 5.4 million tonnes per annum and with
production in the process of being expanded to 8 million tonnes per
annum; and
- Cockatoo Island Project located off the north-west of Western
Australia, where Portman has a 50% share of production, which is
around 0.6 million tonnes per annum of premium fines.
1.2 CLIFFS AUSTRALIA'S OFFER
Cliffs Australia is offering to acquire all of your Portman Shares. The
consideration under the Offer is A$3.40 cash per Portman Share.
Cliffs Australia's Offer is subject to a number of conditions. Those
conditions are summarised in section 8.4 of the Bidder's Statement and set
out in full in Appendix 2 of the Bidder's Statement.
Further details on the Offer are set out in sections 6 and 7 of this
Target's Statement.
1.3 ASSESSMENT OF THE OFFER
Prior to making a decision whether or not to accept Cliffs Australia's
Offer for your Portman Shares, Portman Shareholders should read this
Target's Statement carefully and seek independent financial and taxation
advice.
1.4 DIRECTOR'S RECOMMENDATION
The Portman Directors' recommendation is to accept the Offer in the
absence of a superior offer. Further details are set out in section 2 of
this Target's Statement.
1.5 HOW TO ACCEPT THE OFFER
To accept the Offer you must follow the instructions set out in Appendix 1
of the Bidder's Statement.
1.6 HOW TO REJECT THE OFFER
To reject the Offer you need not take any action. However, you should note
that the Portman Directors' recommendation is to accept the Offer in the
absence of a superior offer.
70
1.7 INFORMATION LINE
If you have any queries in relation to the Offer you can call the
shareholder information line on 1 800 24 23 00 (callers in Australia) or +
61 2 9207 3622 (callers outside Australia).
In accordance with legal requirements, calls to the shareholder
information line will be recorded.
2. DIRECTORS' RECOMMENDATION
2.1 DIRECTORS OF PORTMAN
As at the date of this Target's Statement, the Portman Directors are:
(a) George Francis Jones (Chairman);
(b) Barry John Eldridge (Managing Director);
(c) Fiona Elizabeth Harris;
(d) Michael Delaney Perrott;
(e) Richard Knight; and
(f) Malcolm Hugh Macpherson.
2.2 DIRECTORS' QUALIFICATIONS
Information in relation to the qualifications of each of the Portman
Directors is set out in Annexure A.
2.3 DIRECTORS' RECOMMENDATION
All of the Portman Directors recommend that Portman Shareholders ACCEPT
Cliffs Australia's Offer in the absence of a superior offer, for the
reasons set out in section 3.
2.4 DIRECTORS' INTENTIONS REGARDING ACCEPTANCE OF THE OFFER
Each of the Portman Directors by whom, or on whose behalf, Portman Shares
are held intends to accept the Offer in the absence of a superior offer.
3. REASONS FOR DIRECTORS' RECOMMENDATION
3.1 SUMMARY OF REASONS
The Directors of Portman unanimously recommend that, in the absence of a
superior offer, you accept the Offer for all your Portman Shares. All of
the directors of Portman intend to accept the Offer in respect of their
own shares, in the absence of a superior offer.
This recommendation is based on the following three key factors.
- Firstly, the Directors' opinion that the Offer fairly values Portman
Shares.
71
- Secondly, the Directors' opinion that the Offer represents an
acceptable premium for control.
- Thirdly, the fact that since the announcement of the Offer and in
the last seven months since speculation about corporate interest in
Portman first emerged, no other party has announced an offer for all
Portman Shares on issue.
Each of these reasons is discussed in detail below.
3.2 THE OFFER REPRESENTS FAIR VALUE FOR PORTMAN SHARES
Portman has a detailed corporate financial model (FINANCIAL MODEL) which
it uses to:
- Analyse the impact of capital and development decisions on the
potential value of Portman Shares.
- Determine a range of possible values of Portman shares and compare
that range with the price at which Portman shares trade in the
market.
This Financial Model provides for the valuation of Portman's major assets
by applying a discount rate to forecast cash flows and adding the value
determined to the Portman board's assessed value of any surplus assets
held by Portman.
To assess the fairness of this Offer the board of Portman has considered
the outputs from this Financial Model based on a range of assumed inputs
(using a valuation date of 1 January 2005). The key assumed inputs are
summarised below.
3.3 KEY ASSUMPTIONS IN THE FINANCIAL MODEL
(a) IRON ORE PRICES
Portman generates revenue from the sale of iron ore. Iron ore prices
are determined predominantly by world markets which are affected by
a number of factors outside of Portman's control. The determination
by Portman of a fair value for Portman Shares through the
application of the Financial Model is therefore critically dependent
on assumptions made in relation to iron ore prices that are applied
in the Financial Model.
The iron ore market is enjoying one of its most buoyant periods ever
and there is growing optimism that these good times will continue
for longer than many people had previously thought possible.
However, there are a range of views on how long the current buoyant
market conditions will prevail and the timing and extent of any
downturn in prices. The Portman board believes that the current
strength in iron ore prices has been driven by an excess of demand
over supply. However, the board anticipates that additional supply
that is currently planned to be brought to the market in the next
few years may put downward pressure on iron ore prices.
Annual iron ore price negotiations are currently being conducted by
the three major iron ore producers (BHP Billiton Limited, Rio Tinto
Limited and Brazilian producer Companhia Vale do Rio Doce) and their
major
72
customers. The prices being negotiated will take effect from 1 April
2005 for Japanese customers and Baosteel in China and 1 January 2005
for all other Chinese customers. The prices agreed will also
determine the price at which Portman supplies iron ore to its
customers. Portman is unable to give any guidance on timing for
completion of those negotiations or their likely outcome. The
Portman board considered the merits of the Offer in light of a range
of assumed possible conservative and optimistic iron ore price
outcomes from the current round of negotiations and in the longer
term. Those assumed outcomes were applied in the Financial Model.
In the determination of this assumed range of prices Portman
directors have been mindful of:
- the outcome of recent coking coal price renegotiations;
- the short supply in the iron ore market:
- the significant expansion of other existing iron ore
operations underway and additional production expected to come
on stream over the next 5 years and the impact this additional
production may have on iron ore prices should the iron ore
market move into surplus;
- prices achieved in iron ore price negotiations over the last
20 years;
- the relative size, quality, and logistics considerations that
are associated with the purchase of iron ore from Portman;
- the estimates made by broker analysts of the iron ore prices
expected to be achieved by listed companies in Portman's
likely peer group in the short and long term;
- the published views of iron ore market specialists; and
- recent media commentary speculating that iron ore price
increases of up to 50% could be achieved in the current iron
ore price negotiations.
(b) FOREIGN EXCHANGE RATES
Portman generates all of its sales revenue in United States dollars.
Accordingly the amount of Australian dollars that it generates
fluctuates with changes in Australian dollar to United States dollar
exchange rate. These changes are also outside Portman's control.
Portman has hedging in place to cover approximately 50% of forecast
sales for 2005 and accordingly is not exposed to exchange rate
fluctuations in relation to these sales.
73
The Board has assumed that exchange rates will stay around current
levels in the short to medium term and in the longer term will
generally move in line with assumed commodity prices.
(c) ALLOWANCE FOR OPERATIONAL AND DEVELOPMENT RISKS
Portman's operations are subject to a number of factors that can
cause material delays or changes in operating costs for varying
lengths of time.
Operational risks include weather and natural disasters, unexpected
technical problems, equipment failures, and disruptions of rail
infrastructure and ship loading facilities. Industrial disruptions
may also result in production losses or delays in the delivery of
the product.
In considering the value of a Portman Share, the board has assumed
that operations are not impacted by any of these external or
internal influences, other than routine maintenance and logistical
considerations experienced in the normal course of Portman's
operations. Portman is currently offering for tender the operating
contract for the Koolyanobbing Project. It has been assumed that
there will be no material changes in operating costs as a
consequence of completion of this tender process.
There are a number of development risks associated with the
expansion of the Koolyanobbing Project and the development of the
Northern Tenements associated with the Koolyanobbing Project. These
expansions represent the primary growth prospects of Portman's
production profile in the short term. The risks associated with the
expansion and development of the Koolyanobbing Project include the
risk that estimates of ore reserves, production rates, and, capital
and operating costs will not prove to be accurate. In particular,
estimates of ore reserves, product quality and operating costs are
difficult to make, because they are largely dependent on the
interpretation of geological data obtained from sampling techniques
and feasibility studies, which are subject to various uncertainties.
In considering the value of a Portman share, the board has assumed
that the development of these projects proceeds in accordance with
approved budgets and that the operational performance of the
projects is in line with those budgets.
Even though it has been assumed in the application of the Financial
Model that a number of operational and development risks will not
arise, such risks could arise and these could affect the value of a
Portman share.
(d) DISCOUNT RATE
As noted above, this Financial Model provides for the valuation of
Portman's major assets by applying a discount rate to forecast cash
flows and adding the value determined to the Portman board
determined value of any surplus assets held by Portman.
Selection of the appropriate discount rate to apply to the forecast
cash flows of any business assets is fundamentally a matter of
judgment about the discount rates that may be utilised by potential
acquirors of the assets.
74
Discount rates usually represent an estimate of the weighted average
cost of capital (WACC) appropriate for these assets, with WACC being
calculated based on a weighted average cost of debt and the cost of
equity.
Portman's Australian dollar cash flows were discounted at a weighted
average cost of capital of 10% nominal.
(e) SURPLUS ASSETS NOT INCLUDED IN DISCOUNTED CASH FLOW ANALYSIS
The board has added cash at 31 December 2004, cash generated on the
exercise of Portman Options on issue, and the board's assessment of
the exploration potential of assets not included in the cash flow
analysis to the discounted cash flow valuations of Portman's major
assets in the board's consideration of the value of each Portman
Share on a fully diluted basis.
3.4 PORTMAN'S SHARE TRADING PRICE HAS INCREASED SUBSTANTIALLY OVER THE LAST
TWELVE MONTHS
[LINE GRAPH]
Source: Iress
As indicated in the chart above, the price of Portman Shares has increased
substantially in the 12 months to 7 January 2005.
There are a number of reasons for this increase including:
- The price of Portman's Shares has increased because of a general
upgrade in the value of other listed Australian commodity companies
driven by an expectation of continued strong Chinese demand with
consequent increases in commodity prices.
- The price of Portman's Shares may also have increased because of
speculation in relation to corporate activity which commenced in May
2004 and the announcement in October 2004 of the $55 million
expansion of its Koolyanobbing iron ore operation in Western
Australia from 5.4 million tonnes per annum to 8 million tonnes per
annum.
75
Despite the substantial increases in the market price for Portman Shares
over the last 12 months, there is no certainty that the positive market
conditions presently being experienced in the equities market and by
commodities companies in particular will continue.
3.5 THE OFFER INCLUDES A PREMIUM FOR CONTROL
The Offer represents:
- a 43.9% premium to the volume weighted average price for the six
months to 7 January 2005 (the last trading day before Portman
requested a trading halt on 10 January 2005);
- a 25.2% premium to the volume weighted average price for the 3
months to 7 January 2005;
- a 21.8% premium to the volume weighted average price for the month
to 7 January 2005; and
- an 11.5% premium to the closing price of Portman shares on 7 January
2005.
These share price premiums are shown in the chart below.
[BAR GRAPH]
Source: Iress
The board of Portman believes that the control premium offered is
acceptable having considered the significant recent increase in the share
price for Portman and also that:
- Cliffs Australia will not be able to unlock material synergies, the
value of which might otherwise have been shared with Portman
shareholders;
- the Offer fairly values Portman Shares; and
76
- in addition to normal transaction costs (eg financing and advisory
fees) the total acquisition cost for Cliffs Australia will increase
by approximately 5.4% (approximately 16 cents per Portman Share)
because of stamp duty which is payable in Western Australia.
3.6 AN ALTERNATIVE OFFER PROVIDING SUPERIOR VALUE IS YET TO EMERGE
Corporate interest in Portman was sparked in May 2004 when Portman became
aware that a shareholding of approximately 7.5% had been accumulated by a
Hong Kong listed company called China On-line (Bermuda) Limited.
After considerable media speculation about China On-line's ambitions in
relation to Portman, China On-line sold its shareholding to Consolidated
Minerals Limited in July 2004.
Consolidated Minerals Limited subsequently increased its holding in
Portman to 14.8% by 6 September 2004 and made a number of public
statements expressing its desire to enter into merger discussions with
Portman. On 22 December 2004, Consolidated Minerals Limited announced that
it was no longer a substantial shareholder in Portman and that it had sold
the majority of its shareholding for $2.75 per share.
On 11 January 2005, the day following the announcement of a trading halt
by Portman, there was media speculation that offers may have been received
from a range of parties including Glencore International AG, some un-named
Chinese companies, the Brazilian iron ore producer Companhia Vale do Rio
Doce, and Cliffs.
On 12 January 2005, Cliffs Australia announced its Offer of A$3.40 cash
for each Portman Share.
Since the announcement of the Offer on 12 January 2005, no other party has
announced a superior offer for all Portman Shares.
4. FINANCIAL POSITION OF PORTMAN
Portman's last published financial results, being the Half Yearly Report
for the 6 months ended 30 June 2004, were released to ASX on 10 September
2004.
As at the date of this Target Statement, the audit for the year ended 31
December 2004 has not been completed. However, Portman expects that its
Preliminary Final financial results for the 31 December 2004 year will be
disclosed to ASX during the Offer Period and that these results will be
consistent with the commentary in the Open Briefing released by Portman to
ASX on 2 September 2004 which included discussion on the results for the
half year and the outlook for the balance of 2004.
77
5. INFORMATION RELATING TO THE PORTMAN DIRECTORS
5.1 INTERESTS IN PORTMAN SECURITIES
The following Directors have relevant interests in Portman Shares and
Portman Options in the following amounts:
PORTMAN SHARES BENEFICIALLY
DIRECTOR HELD PORTMAN OPTIONS BENEFICIALLY HELD
---------- --------------------------- ---------------------------------
George Jones 4,750,000 Nil
Barry Eldridge 657,000 1,000,000
Michael Perrott 620,000 Nil
Richard Knight 100,000 Nil
Fiona Harris Nil Nil
Malcolm Macpherson Nil Nil
5.2 DEALINGS IN PORTMAN SHARES
No Director has acquired or disposed of any Portman Shares in the four
month period ending on the date immediately before the date of this
Target's Statement.
5.3 DEALINGS IN PORTMAN OPTIONS
Barry Eldridge, Portman's Managing Director, holds Portman Options and
intends, in the absence of a superior offer, to enter into an Option
Cancellation Deed with Cliffs Australia in relation to his Portman Options
(see section 6.3 for further details on the offer by Cliffs Australia to
Portman Optionholders and the Option Cancellation Deeds).
5.4 INTERESTS IN CLIFFS SHARES AND CLIFFS OPTIONS
As at the date of this Target's Statement, no Portman Director has a
relevant interest in any Cliffs Shares or Cliffs Options.
5.5 DEALINGS IN CLIFFS SHARES AND CLIFFS OPTIONS
None of Portman, the Directors or their associates has acquired or
disposed of a relevant interest in any Cliffs Shares or Cliffs Options in
the four month period ending on the date immediately before the date of
this Target's Statement.
5.6 BENEFITS AND AGREEMENTS
(a) BENEFITS IN CONNECTION WITH THE RETIREMENT FROM OFFICE
As a result of the Offer, no person has been or will be given any
benefit (other than a benefit which can be given without member
approval under the Corporations Act) in connection with the
retirement of that person or
78
someone else from a board or managerial office of Portman or a
related body corporate of Portman.
(b) AGREEMENT CONNECTED WITH OR CONDITIONAL ON THE OFFER
There are no agreements made between any Portman Director and any
other person (including Cliffs or Cliffs Australia) in connection
with, or conditional upon, the outcome of the Offer.
(c) INTERESTS OF PORTMAN DIRECTORS IN CONTRACTS WITH CLIFFS OR CLIFFS
AUSTRALIA
None of the Portman Directors have entered into any contracts with
Cliffs or Cliffs Australia.
6. KEY FEATURES OF CLIFFS AUSTRALIA'S OFFER
6.1 CONSIDERATION PAYABLE TO PORTMAN SHAREHOLDERS WHO ACCEPT THE OFFER
The consideration being offered by Cliffs Australia is A$3.40 cash per
Portman Share.
6.2 OFFER SUBJECT TO CONDITIONS
Cliffs Australia's Offer is subject to a number of conditions. The full
terms of these conditions are summarised in section 8.4 of the Bidder's
Statement and set out in full in Appendix 2 of the Bidder's Statement.
6.3 OFFER FOR PORTMAN OPTIONS
Cliffs Australia and Portman intend to make individual proposals to each
holder of Portman Options to cancel their Portman Options in
consideration, per Portman Option, for the payment of A$3.40 less the
relevant exercise price of the Portman Option. The consideration for the
cancellation will be provided by Cliffs Australia. The cancellation and
payment of consideration will be subject to the satisfaction or waiver of
the conditions that each condition to which the Offer is subject is either
fulfilled or waived and that Portman is removed from the official list of
the ASX.
The Offer is conditional on the holders of 75% of the Portman Options
either exercising their Options or entering into an Option Cancellation
Deed. The Option Cancellation Deed may be terminated by a holder of
Portman Options if a superior competing offer has been announced and
Cliffs Australia has not matched or exceeded that offer within 7 business
days (in Perth and Sydney). The Portman board anticipates that (in the
absence of a superior offer) all holders of Portman Options will enter
into the Option Cancellation Deed before the end of the Offer Period.
7. MECHANICS OF THE OFFER
7.1 OFFER PERIOD
Cliffs Australia's Offer will be open for acceptance from 24 January 2005
until 7pm (Perth time) on 25 February 2005, unless it is extended or
withdrawn.
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7.2 EXTENSION OF THE OFFER PERIOD
Cliffs Australia may extend the Offer Period at any time before giving the
Notice of Status of Conditions while the Offer is subject to a defeating
condition. However, if the Offer is not subject to a defeating condition
(that is, it is free of all defeating conditions), Cliffs Australia may
extend the Offer Period at any time before the end of the Offer Period. To
extend the Offer Period, Cliffs Australia must lodge a notice of variation
with ASIC and give a notice to Portman and to each Portman Shareholder to
whom offers were made under the bid.
In addition, there will be an automatic extension of the Offer Period if,
within the last 7 days of the Offer Period:
(a) Cliffs Australia improves the consideration under the Offer; or
(b) Cliffs Australia's voting power in Portman increases to more than
50%.
If either of these events occur, the Offer Period is automatically
extended so that it ends 14 days after the relevant event occurs.
7.3 WITHDRAWAL OF OFFER
Cliffs Australia may not withdraw the Offer if you have already accepted
it. Before you accept the Offer, Cliffs Australia may withdraw the Offer
with the written consent of ASIC and subject to the conditions (if any)
specified in such consent.
7.4 EFFECT OF ACCEPTANCE
The effect of acceptance of the Offer is set out in Appendix 1 of the
Bidder's Statement. Portman Shareholders should read these provisions in
full to understand the effect of acceptance and the representations and
warranties which they give by accepting the Offer.
7.5 NO ABILITY TO WITHDRAW YOUR ACCEPTANCE
You only have limited rights to withdraw your acceptance of the Offer.
You may only withdraw your acceptance of the Offer if:
(a) it is still subject to a defeating condition; and
(b) Cliffs Australia varies the Offer in a way that postpones, for more
than one month, the time when Cliffs Australia needs to meet its
obligations under the Offer. This may occur if Cliffs Australia
extends the Offer Period by more than one month and the Offer is
still subject to a defeating condition.
7.6 WHEN WILL YOU RECEIVE YOUR CONSIDERATION IF YOU ACCEPT CLIFFS AUSTRALIA'S
OFFER?
Full details of when you will be issued your consideration are set out in
Appendix 1 of the Bidder's Statement. If you accept the Offer in
accordance with the instructions contained in the Offer and the Acceptance
Form, you will be sent payment within one month after the later of the
date you accept and the date the Offer becomes, or is declared, free of
the conditions to which it is subject. In any
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event, assuming the conditions of the Offer are satisfied or waived, you
will be sent payment within 21 days after the Offer closes.
7.7 EFFECT OF AN IMPROVEMENT IN CONSIDERATION ON PORTMAN SHAREHOLDERS WHO HAVE
ALREADY ACCEPTED THE OFFER
If Cliffs Australia improves the consideration, all Portman Shareholders,
whether or not they have accepted the Offer prior to that improvement in
consideration, will be entitled to the benefit of that improved
consideration. If a new form of consideration is offered, Portman
Shareholders who have accepted the Offer will be entitled to make a fresh
election as to the form of consideration to be taken.
7.8 NOTICE OF STATUS OF CONDITIONS
The Bidder's Statement specifies in Appendix 1 the date on which Cliffs
Australia will give its Notice of Status of Conditions to the ASX and
Portman. If the Offer Period is extended by a period before the time by
which the Notice of Status of Conditions is to be given, the date for
giving the Notice of Status of Conditions will be taken to be postponed
for the same period. In the event of such an extension, Cliffs Australia
is required, as soon as is practicable after the extension, to give notice
to ASX and Portman that states the new date for the giving of the Notice
of Status of Conditions.
Cliffs Australia is required to set out in its Notice of Status of
Conditions:
- whether the Offer is free of any or all conditions;
- whether, so far as Cliffs Australia knows, any of the conditions
have been fulfilled; and
- Cliffs Australia's voting power in Portman.
If a condition is fulfilled (so that the Offer becomes free of the
condition) before the date on which the Notice of Status of Conditions is
required to be given, Cliffs Australia must, as soon as practicable, give
ASX and Portman a notice that states that the particular condition has
been fulfilled.
7.9 COMPULSORY ACQUISITION
Cliffs Australia has indicated in section 4.4 of the Bidder's Statement
that if it becomes entitled to proceed to compulsory acquisition of
Portman Shares in accordance with the Corporations Act and the other
conditions of the Offer are satisfied, then Cliffs Australia intends to do
so.
The two types of compulsory acquisition under Chapter 6A of the
Corporations Act are discussed below.
(a) FOLLOW ON COMPULSORY ACQUISITION
Under Part 6A.1, Cliffs Australia will be entitled to compulsorily
acquire any Portman Shares on the same terms as the Offer if, during
or at the end of the Offer Period, Cliffs Australia (together with
its associates):
(i) has relevant interests in at least 90% (by number) of the
Portman Shares; and
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(ii) has acquired at least 75% (by number) of the Portman Shares
that Cliffs Australia offered to acquire under the Offer
(whether the acquisitions happened under the Offer or
otherwise).
If these thresholds are met, Cliffs Australia will have up to one
month after the end of the Offer Period within which to give
compulsory acquisition notices to Portman Shareholders who have not
accepted the Offer. Portman Shareholders have statutory rights to
challenge the compulsory acquisition, but a successful challenge
will require the relevant Portman Shareholder to establish to the
satisfaction of a court that the terms of the Offer do not represent
"fair value" for the Portman Shares.
Portman Shareholders should be aware that if they don't accept
Cliffs Australia's Offer and their Portman Shares are compulsorily
acquired, those Portman Shareholders will face a delay in receiving
the consideration for their Portman Shares compared with Portman
Shareholders who have accepted Cliffs Australia's Offer.
(b) GENERAL COMPULSORY ACQUISITION
Under Part 6A.2, Cliffs Australia will be entitled to compulsorily
acquire any Portman Shares, if Cliffs Australia holds full
beneficial interests in at least 90% of Portman Shares (ie. if
Cliffs Australia becomes a 90% HOLDER).
If this threshold is met, Cliffs Australia will have 6 months after
Cliffs Australia becomes a 90% holder within which to give
compulsory acquisition notices to Portman Shareholders. The
compulsory acquisition notices sent to Portman Shareholders must be
accompanied by an independent expert's report and an objection form.
The independent expert's report must set out whether the terms of
the compulsory acquisition give a "fair value" for the Portman
Shares and the independent expert's reasons for forming that
opinion.
If Portman Shareholders with at least 10% of Portman Shares covered
by the compulsory acquisition notice object to the acquisition
before the end of the objection period (which must be at least one
month), Cliffs Australia may apply to the Court for approval of the
acquisition of the Portman Shares covered by the notice.
Portman Shareholders should be aware that if they don't accept
Cliffs Australia's Offer and their Portman Shares are compulsorily
acquired, those Portman Shareholders will face a delay in receiving
the consideration for their Portman Shares compared with Portman
Shareholders who have accepted Cliffs Australia's Offer.
7.10 DE-LISTING
In the case of a compulsory acquisition following a takeover bid (see
section 7.9(a) of this Target's Statement) ASX will suspend quotation of
Portman's Shares 5 business days after it receives a copy of the
compulsory acquisition notice sent to Portman Shareholders who did not
accept the Offer.
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In the case of a general compulsory acquisition (see section 7.9(b) of
this Target's Statement), ASX will suspend quotation of Portman's Shares 5
business days after it receives written notice from Portman of either of
the following:
(a) the objection period set out in the compulsory acquisition notice
has ended and holders of at least 10% of Portman Shares covered by
the compulsory acquisition notice have not objected before the end
of the objection period; or
(b) the Court has approved the acquisition under section 664F of the
Corporations Act.
8. OTHER MATERIAL INFORMATION
8.1 ISSUED CAPITAL
As at the date of this Target's Statement, Portman's share capital
consisted of 175,680,073 Portman Shares. In the Bidder's Statement sent to
Portman Shareholders with this Target's Statement on 21 January 2005,
Cliffs Australia disclosed that it does not have a relevant interest in
any Portman Shares.
8.2 BREAK FEE AGREEMENT
Portman and Cliffs entered into the Break Fee Agreement on 11 January 2005
in relation to the proposal that Cliffs Australia make an offer to Portman
Shareholders for all of their Portman Shares.
Under the terms of the Break Fee Agreement, Portman agrees to pay Cliffs
the sum of $6,000,000 (being approximately 1% of the aggregate of the
total consideration to be offered by Cliffs Australia under the Offer and
in connection with the acquisition or cancellation of the Portman Options)
in the following circumstances:
(a) if the Board either does not make a recommendation in this Target's
Statement to accept the Offer, or having made it, adversely changes
its recommendation, except where this occurs:
(i) at least 7 Perth business days after Cliffs Australia becomes
aware that any of the conditions of the Offer have been
breached (other than in consequence of any conduct by Portman
or any of its associates, officers or directors) and Cliffs
Australia has either retained its right to rely on that breach
or not announced that it will not rely on that breach; or
(ii) after a superior competing offer has been announced in respect
of Portman but no third party holds a relevant interest in 50%
or more of the ordinary shares of Portman or appoints to the
board of directors of Portman persons constituting a majority
of the board;
(b) a third party takeover is, or becomes, unconditional and the third
party making the offer holds a relevant interest in 50% or more of
the ordinary shares of Portman or appoints to the board of directors
of Portman persons constituting a majority of the board.
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Portman has also agreed with Cliffs that during the period from 11 January
2005 until the end of the Offer Period Portman will not solicit competing
offers for Portman.
8.3 EFFECT OF OFFER ON PORTMAN'S MATERIAL CONTRACTS
Cliffs Australia's Offer is subject to a number of conditions, as
summarised in section 8.4 of the Bidder's Statement and set out in full in
Appendix 2 of the Bidder's Statement.
The condition set out in paragraph (g) of Appendix 2 of the Bidder's
Statement (exercise of rights condition) provides (in summary) that during
the period from the Announcement Date to the end of the Offer Period no
person exercises or purports to exercise, or states an intention to
exercise, any rights under any agreement (which is material in the context
of Portman and its subsidiaries taken as a whole) that arise from the
change of control of Portman, which results or could result in (among
other things) termination of the agreement.
The agreements described in (a) to (c) below contain change of control
provisions that could, if exercised, result in a breach of the condition
described above.
As far as Portman is aware, these are the only agreements to which it or
any subsidiary is a party that contain termination rights upon a change of
control that could, if exercised, result in a breach of the exercise of
rights condition to the Offer.
(a) COCKATOO ISLAND IRON ORE PROJECT
Portman has a 50% interest in a joint venture with HWE Cockatoo Pty
Ltd (HWE) in respect of the Cockatoo Island iron ore project.
Portman's interest is held by its wholly owned subsidiary, Portman
Iron Ore.
The joint venture agreement contains a change of control provision
which will be triggered if Cliffs Australia acquires effective
control of Portman Iron Ore as a result of the acquisition of more
than 50% of Portman Shares through the Offer. If the change of
control occurs then HWE has the option to acquire Portman Iron Ore's
interest in the joint venture at a price to be mutually agreed
between the parties, or as determined by an expert in the absence of
such agreement.
In addition, Portman Iron Ore and HWE are parties to a sales agency
agreement under which Portman Iron Ore acts as HWE's agent and
representative worldwide for the marketing, sale and distribution of
its share of the iron ore produced by the Cockatoo Island iron ore
joint venture. This agreement also contains a change of control
provision which would allow HWE to terminate the sales agency
agreement if Cliffs Australia acquires 50% or more of Portman Shares
under the Offer without HWE's consent.
Portman believes that written consent will be provided by HWE to the
change of control.
(b) ESPERANCE PORT AUTHORITY OPERATING AGREEMENT
Portman Iron Ore and the Esperance Port Authority (EPA) are parties
to an operating agreement under which EPA arranges and manages the
unloading and stockpiling of iron ore at the Esperance Port and
loads it onto vessels for
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shipment to Portman Iron Ore's customers. Portman and EPA are also
parties to a deed of guarantee and indemnity under which Portman
guarantees the performance of Portman Iron Ore's obligations under
the operating agreement.
The agreement and the deed of indemnity contain change of control
provisions which would allow EPA to terminate the operating
agreement if Cliffs Australia acquires effective control of Portman
Iron Ore as a result of the acquisition of Portman Shares through
the Offer without EPA's consent.
Portman believes that written consent will be provided by EPA to the
change of control.
(c) COMMONWEALTH BANK OF AUSTRALIA FACILITY
Portman has a $40 million Multi-Option Facility Agreement with
Commonwealth Bank of Australia (CBA). The acquisition of more than
20% of the shares in Portman by Cliffs Australia will trigger a
change of control provision in the facility agreement pursuant to
which CBA may take certain action, including terminating the
facility and demanding repayment of outstanding amounts.
In section 8.2 (c) of the Bidder's Statement, Cliffs Australia
states that if the Offer becomes unconditional, Cliffs Australia
will discuss with CBA whether it intends to exercise its termination
right and that if CBA does seek to terminate the facility, Cliffs
Australia intends to refinance the facility with an alternative
financial institution and does not anticipate any difficulties in
being able to do so.
Portman believes that CBA will not exercise its termination rights
under the Agreement.
8.4 PORTMAN DIVIDENDS
In the ordinary course of events, the Portman board would consider the
declaration of a final dividend for the year ended 31 December 2004 at its
board meeting at the end of February 2005.
On the current timetable, the Offer may have closed by that date. If the
Offer Period is extended, the Portman board presently intends to defer any
decision in relation to the final dividend until the outcome of the Offer
is known.
The Offer is in relation to all of your Portman Shares and all rights
(including dividends) attaching to those Portman Shares after the
Announcement Date. As a result, if Portman was to pay a dividend to
Portman Shareholders during the Offer Period Cliffs Australia would have
the right to deduct the amount of the dividend per Portman Share from the
consideration paid to any Portman Shareholder who accepts the Offer after
the payment of the dividend.
8.5 TAXATION CONSIDERATIONS
A discussion on the Australian taxation consequences for a disposal of
Portman Shares is set out in section 7 of the Bidder's Statement.
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YOU SHOULD CONSULT WITH YOUR TAXATION ADVISER REGARDING THE CONSEQUENCES
OF A DISPOSAL OF PORTMAN SHARES UNDER THE OFFER.
8.6 MATERIAL LITIGATION
Portman is not involved in any material litigation. However, Sons of
Gwalia Limited (SOG) and Portman Iron Ore (a wholly owned subsidiary of
Portman) have been engaged in a dispute (which has not resulted in any
legal proceedings being commenced) relating to royalties that SOG claims
are owed to it by Portman Iron Ore arising from mining operations
conducted by Portman Iron Ore at the Mount Jackson Mine (which is part of
the Koolyanobbing Project). SOG has indicated to Portman that it will
settle the dispute for an amount of $3.5 million, but at the date of this
Target's Statement the settlement offer has not been accepted by Portman
Iron Ore and the likely outcome of settlement negotiations is not known.
8.7 CONSENTS
This Target's Statement contains statements made by, or statements said to
be based on statements made by, the Portman Directors. Each of the Portman
Directors has consented to the inclusion of each statement he or she has
made in the form and context in which each statement appears and has not
withdrawn that consent at the date of this Target's Statement.
As permitted by ASIC Class Order 03/635, this Target's Statement may
include or be accompanied by certain statements:
- fairly representing a statement by an official person; or
- from a public official document or a published book, journal or
comparable publication.
Under this Class Order, the consent of persons that such statements are
attributed to is not required for the inclusion of such statements in the
Target's Statement.
As permitted by ASIC Class Order 01/1543 this Target's Statement contains
statements which are made, or based on statements made, in the Cliffs
Australia's Bidder's Statement, which has been lodged with ASIC and with
ASX (and which is being given to Portman Shareholders with this Target's
Statement). Under this Class Order, the consent of Cliffs Australia is not
required for the inclusion of such statements in this Target's Statement.
8.8 INTENTIONS FOR PORTMAN IF OFFER IS UNSUCCESSFUL
In section 4 of its Bidder's Statement, Cliffs Australia sets out its
intentions in relation to Portman if Portman becomes a wholly owned
subsidiary of Cliffs Australia and in circumstances where Portman does not
become wholly owned by Cliffs Australia. If the Offer is unsuccessful,
Portman intends to continue its business without any major changes, does
not intend to re-deploy any major assets of Portman and will continue the
employment of Portman's employees.
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8.9 NO OTHER MATERIAL INFORMATION
Except as set out in this Target's Statement, the Bidder's Statement and
the Offer, there is no other information that Portman Shareholders and
their professional advisers would reasonably require to make an informed
assessment whether or not to accept the Offer and reasonably expect to
find in this statement, that is known to any of the Portman Directors and
has not previously been provided to Portman Shareholders or disclosed to
ASX under the regular reporting and disclosure obligations to which
Portman is subject under the Corporations Act and ASX Listing Rules.
ASX announcements released since the date that Portman's last Annual
Report (for the financial year ending 31 December 2003) was announced to
ASX (being 22 April 2004) considered by the Portman Directors to be
particularly important include:
DATE ANNOUNCEMENT
---- ------------
29 April 2004 Finalisation of the Koolyanobbing North Access Agreement with Western Areas NL, which
gave Portman the right to mine and export iron ore from the Northern Tenements of the
Koolyanobbing mine in return for payment of a royalty to Western Areas NL
23 July 2004 Profit upgrade for the 6 month period to 30 June 2004
30 August 2004 Half Yearly Report and half year accounts for the 6 months to 30 June 2004
2 September 2004 Open Briefing, Portman MD on Profit and Outlook
18 October 2004 Board approval for expansion of Koolyanobbing Project to 8 million tonnes per annum
26 October 2004 Third Quarter Activities Report
12 January 2005 Cliffs Australia Offer for Portman Shares
20 January 2005 Fourth Quarter Activities Report
All ASX announcements are available from www.asx.com.au
9. GLOSSARY
9.1 DEFINITIONS
The following definitions apply in this Target's Statement:
$ OR A$ means Australian Dollar.
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ANNOUNCEMENT DATE means 12 January 2005, the date that the Offer was
announced to ASX.
ASIC means the Australian Securities and Investments Commission.
ASX means the Australian Stock Exchange Limited ABN 98 008 624 691.
BIDDER'S STATEMENT means the bidder's statement of Cliffs Australia dated
21 January 2005, which contains the Offer.
BREAK FEE AGREEMENT means the agreement between Cliffs and Portman dated
12 January 2005 summarised in section 8.2.
CLIFFS means Cleveland-Cliffs Inc, a company incorporated in the USA
CLIFFS AUSTRALIA means Cleveland-Cliffs Australia Pty Ltd ACN 112 437 180,
a wholly owned subsidiary of Cliffs
CLIFFS OPTIONS means options convertible into Cliffs Shares.
CLIFFS SHARES means fully paid ordinary shares in Cliffs.
CORPORATIONS ACT means the Corporations Act 2001 (Cth) as amended or
varied by ASIC.
DIRECTORS means the directors of Portman.
LISTING RULES means the Listing Rules of ASX.
NOTICE OF STATUS OF CONDITIONS means Cliffs Australia's notice disclosing
the status of the conditions of the Offer which is required to be given by
section 630(3) of the Corporations Act.
OFFER means the offer by Cliffs Australia for Portman Shares, which is
contained in the Bidder's Statement.
OFFER PERIOD means the period commencing on 24 January 2005 and ending on
25 February 2005 or such later date to which the Offer has been extended.
OPTION CANCELLATION DEED means a deed between Portman and holders of
Portman Options in relation to the cancellation of their Portman Options.
PORTMAN means Portman Limited ABN 22 007 871 892.
PORTMAN DIRECTOR means a director of Portman.
PORTMAN IRON ORE means Portman Iron Ore Limited ACN 001 892 995, a wholly
owned subsidiary of Portman.
PORTMAN OPTIONS means options convertible into Portman Shares.
PORTMAN SECURITIES means Portman Shares and Portman Options
PORTMAN SHAREHOLDER means a holder of Portman Shares.
PORTMAN SHARES means fully paid ordinary shares in Portman.
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PUBLIC AUTHORITY means any governmental, semi-governmental,
administrative, fiscal, judicial or quasi-judicial body, department,
commission, authority, tribunal, agency or entity.
QUOTATION has the same meaning as in the Listing Rules.
TARGET'S STATEMENT means this document, being the statement of Portman
under Part 6.5 of the Corporations Act.
YOU means the person to whom the Offer is made or is deemed to be made.
9.2 INTERPRETATION
The following interpretation rules apply in this Target's Statement unless
the contrary intention appears:
(a) Words and phrases which are defined by the Corporations Act have the
same meaning in this Target's Statement and, if a special meaning is
given for the purposes of Chapter 6 or 6A or a provision of Chapter
6 or 6A of the Corporations Act, have that special meaning.
(b) Headings are for convenience only, and do not affect interpretation.
(c) The following rules also apply in interpreting this Target's
Statement except where the context makes it clear that a rule is not
intended to apply.
(i) A singular word includes the plural, and vice versa.
(ii) A word which suggests one gender includes the other genders.
(iii) If a word is defined, another part of speech has a
corresponding meaning.
(iv) References in this Target's Statement to sections, clauses,
paragraphs and subparagraphs, are to sections, clauses,
paragraphs and subparagraphs of the Target's Statement.
(v) References in this Target's Statement to appendices are to
appendices of the Target's Statement.
(vi) A reference to a person includes a reference to a corporation.
(d) Appendices to this Target's Statement form part of it.
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DATED 21 January 2005
SIGNED for and on behalf of Portman by George Jones, being the Chairman of
Portman who is authorised to so sign by a resolution passed by the Portman
Directors. This Target's Statement has been approved by a resolution passed by
the Portman Directors.
/s/ George Jones
GEORGE JONES
CHAIRMAN
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ANNEXURE A
DIRECTORS' QUALIFICATIONS
CHAIRMAN
George F Jones - B.Bus, FCIS, FAICD
Mr Jones has a Bachelor of Business degree from Curtin University of Western
Australia. He has more than 32 years experience in the mining, banking and
finance industries and has been a director of a number of private and publicly
listed companies.
MANAGING DIRECTOr
Barry J Eldridge - B.Sc (Exploration Geology), B.Sc (Hons.Mining)
Mr Eldridge holds a Bachelor of Science Degree (Exploration Geology) - Sydney
University and a Bachelor of Engineering (Hons) (Mining) - University of Qld. He
has over 30 years experience as Managing Director, CEO, Director and General
Manager level in the resource industry within Australia and overseas. This has
included six years as Managing Director, four of which were with Forrestania
Gold NL (a publicly listed mining company).
NON-EXECUTIVE DIRECTOR
Richard Knight - M.Sc (Eng), DIC, ARSM, C.Eng, FAICD
Mr Knight is a mining engineer with 40 years diverse experience. He was formerly
Executive Director - Development and Executive Director - Bulk Commodities of
North Limited, and Chief Executive of Energy Resources of Australia Limited. He
is formerly Managing Director of Inco Australia Management Pty Ltd and currently
a Director of Zinifex Limited
NON-EXECUTIVE DIRECTOR
Michael D Perrott - B.Com, FAIM
Mr Perrott has been involved in industries associated with construction,
contracting, mining and land development since 1969. He is currently Chairman of
Port Bouvard Limited, GME Resources Limited, Bone Medical Limited and Canning
Vale Weaving Mills Limited. He is a member of the Board of Notre Dame University
and a council member of the National Advisory Council for Suicide Prevention and
the State Ministerial Council for Suicide Prevention.
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NON-EXECUTIVE DIRECTOR
Fiona E Harris, B Comm, FCA, FAICD
Fiona Harris is a professional non-executive Director. Previously, she spent 14
years with a major chartered accounting firm in Perth, San Francisco and Sydney.
She was an Audit & Assurance partner in the New South Wales practice of that
firm when she retired in 1994. She is a director of Alinta Limited, NM
Rothschild & Sons (Australia) Limited, HBF Health Funds Inc and West Australian
Symphony Orchestra Holdings Pty Ltd. Fiona is Vice President of the State
Council of the Australian Institute of Company Directors. She has been a
Director of Portman Limited since December 2003. Fiona is Chairman of the
Board's Treasury Committee and of the Audit & Risk Management Committee.
NON-EXECUTIVE DIRECTOR
Malcolm H Macpherson, B Sc, FAusIMM, FTSE
Mr Macpherson has had extensive experience in the mining and minerals industry
at both the operational and executive level. He is a director of Minara
Resources Limited, Chairman of the Cooperative Research Centre for Sustainable
Resource Processing. He is also Chairman of the not for profit, Independent
Living Centre of W.A.(Inc) and a member of the senate of Murdoch University.
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