Molycorp (MCP) In-Play as Chatter Heats Up

January 2, 2013 8:12 AM EST
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Molycorp (NYSE: MCP) shares are popping higher amid positive chatter on a potential M&A deal.

According to Bloomberg, Molycorp's recent drop to a level below its net assets is making the rare earth mineral giant ripe for the picking. Molycorp saw a 61 percent drop in market value through 2012 as rare earth prices, cost overruns, a CEO departure,and federal probe hit the company.

Potential suitors range from Siemens AG (NYSE: SI) and Nissan, to private equity firms. Estimates have Molycorp potentially getting $15 per share in a bid, a 59 percent premium from Monday's close at $9.44, but 58 percent lower than Molycorp's 52-week high of $35.79 hit last April.

Molycorp is the largest holder of rare earth deposits in the U.S. It acquired Net Material last year in a $1.1 billion deal, bolstering its processing capability.

Latest data has Molycorp going for about 0.81 times book value, about 1 point lower than Australia's Lunas Corp, which goes for 1.8 times.

One drawback might be Molycorp's Mountain Pass facility. Buyers might hold off until the facility is up and running due to a new technique being used at the play.

Molycorp is up more than 5.5 percent in early trading Wednesday.

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