Kazakh muscle to succeed in lowball bid for stricken ENRC
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Tuesday 25 June 2013
The government of Kazakhstan last night looked set to take the scandal-struck mining giant ENRC off the London Stock Exchange in the hope of stemming the tide of negative publicity it has brought the mineral-rich nation.
Along with the three central Asian oligarchs who founded the business, the Kazakh government is planning to buy out the 46 per cent of ENRC that it does not already own.
Kazakhmys, the mining group which is ENRC's biggest other shareholder at 26 per cent, accepted the offer. The Kazakh government is also a key shareholder in Kazakhmys, with 27 per cent of the company.
In fact, the deal is structured so that the government sells its Kazakhmys stake to ENRC's minority shareholders. The deal, which also includes cash, values ENRC at £2.9bn.
Shares in Kazakhmys tumbled more than 13 per cent to 233.7p, as investors reacted to the likely loss of one of its key shareholders.
For ENRC investors, it represented an even lower offer price than the consortium's first approach, at 226p a share, compared with 260p a month ago. That was primarily because of the fall in Kazakhmys shares. Investors will get $2.65 (£1.72) in cash and 0.23 Kazakhmys shares for each of their ENRC stocks.
The deal was reluctantly accepted by the Kazakhmys board, where the chairman, Simon Heale, said the bid possibly undervalued the shares, but that the alternative – an even more unstable ENRC – was worse.
ENRC's independent directors put up resistance, voicing their opposition to the offer, although in reality they remain fairly powerless. The committee's head, Mohsen Khalil, said it was "very disappointed by the value of the offer, which it believes materially undervalues ENRC, its fundamentals, the intrinsic value of its underlying assets and its growth prospects".
ENRC, which is being scrutinised by the Serious Fraud Office, has been a magnet for controversy since it floated in the London Stock Exchange six years ago and bought, via middleman Dan Gertler, a vast mining resource in the Congo that had been stripped from its former owners.
Privately, anti-corruption campaigners last night expressed concerns that the investigations into the company would be dropped after ENRC disappears from the stock market.
ENRC mines metals in Africa and Kazakhstan as well as other territories. Its share price has halved in the past year amid corruption allegations about its operations in the two countries.
The move by Kazakhmys makes the takeover all but inevitable, with 80 per cent of investors backing it. Given the strong negotiating position of the three oligarchs – Alexander Machevitch, Patokh Chodiev and Alijan Ibragimov – other shareholders in ENRC, and indeed those minority investors in Kazakhstan, had very little with which to negotiate a better price.
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