Noble Group (DBS)

BUY; S$1.97; Price Target: 12-Month S$ 2.6

Territory Resources board recommends takeover offer from Noble

This morning, Territory Resources’ (TTY) board unanimously recommended the acceptance of Noble’s offer to acquire up to 100% of the fully paid ordinary shares in TTY at A$0.50 per share by way of an unconditional on-market takeover. Noble had previously announced its takeover offer via Jonesville Limited, a wholly owned subsidiary on 9 June 2011. Jonesville currently owns a 32.01% stake in TTY. TTY’s board believes that the Noble offer is superior to the bid by Exxaro announced on 23 May 2011, which offered to acquire TTY at A$0.46 per share. TTY had previously signed a Bid Implementation Agreement with Exxaro.

From 9 June 2011 till close of the offer on Thursday 21 July, Noble via Jonesville will buy on-market every TTY share offered to it (up to a maximum of 198.25m shares) at AS$0.50 per share. We believe Noble can easily fund the A$99.1m purchase cost.

TTY also noted in this morning’s announcement that due to the recommendation to accept Noble’s offer, a break fee of c.A$1.56m will be payable to Exxaro. Furthermore, an undrawn US$36m debt facility provided by Exxaro to TTY may potentially be cancelled immediately. Should Noble complete the transaction, we believe TTY will not have any issue in accessing new debt facilities.

TTY’s share price is currently trading at A$0.515, above Noble’s takeover offer price. Furthermore, without a formal response from Exxaro, there is no guarantee that Noble will be able to complete the takeover of TTY. Our Buy rating on Noble remains unchanged. Until the takeover is finalised, there is no change in our forecasts - to which we do not expect any significant change.