ENRC seeks to buy founders' African assets
Sunday 18 October 2009
Eurasian Natural Resources Corporation (ENRC), the Ftse 100 metals and mining giant, is planning to buy out its founders' African assets in a potentially controversial deal.
The deal, which has not been valued but could be worth more than $2bn (£1.2bn), would be paid entirely or mostly in shares rather than cash. This would increase the three founders' stake from nearly 44 per cent, though the exact amount would depend on the terms of the transaction.
Billionaire founders Patokh Chodiev, Alijan Ibragimov and Alexander Machkevich have been involved in a tax investigation by Belgian authorities for years. As a result, Kazakhstan-based ENRC went through an extraordinarily thorough vetting when it was listed in late 2007. Sources close to the company admit that this could make an all-share deal, which would potentially dilute the stakes of other investors, unpopular.
However, an industry source said that the shareholders' African assets, held in a vehicle called International Mineral Resources, would strengthen ENRC's geographic reach. "The Belgium investigation has gone on for years without getting anywhere and is still going on and it didn't prevent the flotation two years ago. The shareholders will get to vote to approve any deal," he said.
It is understood that the deal will not take place until the first quarter of next year. As the purchase is a related-party transaction – that is, ENRC would be buying assets off key investors – the non-executive directors need to hire independent advisers.
A senior mining banker said that the non-executive board, led by the chairman Dr Johannes Sittard, has started to interview potential advisers. Investment bank Goldman Sachs is believed to be in the running for the role. The source added that ENRC is trying to "tidy up" the company, so that there is no confusion over its ownership structure.
An ENRC spokesman declined to comment on the buy-out news, which emerged after a busy week for the company. It announced on Friday that it had secured approval from the South African Competition Commission to buy Camec, the Alternative Investment Market-listed miner, for nearly £600m. However, this did not prevent shares falling 1.7 per cent to 935p.
Xstrata, the Ftse 100 miner, pulled out of its attempt to merge with rival Anglo American last week. Xstrata's chief executive, Mick Davis, has long harboured plans for the deal to create a dominant player in world mining. There has been speculation that this could lead Mr Davis to return to an old target, Ftse 100 platinum producer Lonmin. However, sources close to the company insisted that any move is not under consideration, so is unlikely to occur before Christmas.
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