UPDATE 2.25pm: Shares in Iron Ore Holdings soared after BC Iron launched a friendly $256 million cash and scrip bid for its fellow Pilbara iron ore player.
The bid is an attempt by the company to boost its scale, give it longer term growth options and put to use the considerable cash it is generating from its Nullagine joint venture project.
BC will offer 0.44 of a new share and 10 cents cash for every IOH share. The offer values IOH at $1.59 a share, more than 50 per cent above its last traded price of 95 cents on Friday.
IOH's board has recommended unanimously that shareholders accept BC's offer.
Kerry Stokes' Australian Capital Equity, which owns 52 per cent of IOH, has also accepted the offer.
IOH shareholders will own about 36.6 per cent of the new entity if they accept the offer and two IOH nominees will be invited to join BC's board.
BC said the transaction would transform it into a mid-cap iron ore company with three major assets, the Nullagine joint venture mine in which it already holds a 75 per cent stake with FMG holding the balance; the Iron Valley project and the Buckland project.
BC Iron managing director Morgan Ball said IOH's portfolio of long-life iron ore assets in the world's best iron ore address presented the company with an excellent opportunity to create meaningful and sustained long-term value for shareholders.
"We are also pleased to welcome IOH's major shareholders on to our register, and we look forward to working with them to deepen our ties in our key markets," he said.
IOH managing director Alwyn Vorster said the combination of the two companies would generate strong technical and commercial synergies, with significant longer term value benefits for all IOH shareholders from the company's assets.
"The transaction structure also supports greater funding and development optionality for the Buckland project, with its road and port components potentially opening up the West Pilbara to other parties," he said.
IOH shares closed up 37.5 cents, or 39.47 per cent, at $1.325 while BC shares gave up 32 cents, or 9.67 per cent, to close at $2.99.