3rd Jun 2015 11:30
LONDON (Alliance News) - Financier Nathaniel Rothschild's NR Holdings Ltd vehicle Wednesday reiterated that the takeover proposal put forward by Asia Coal Energy Ventures Ltd for London-listed Asia Resource Minerals PLC undervalues the Indonesian coal mining company.
The offer from Asia Coal Energy Ventures, a vehicle backed by the Indonesian Widjaja family's Sinarmas Group and managed by hedge fund Argyle Street Management Ltd, values Asia Resource Minerals at 41 pence per share, equivalent to GBP98.8 million. It also plans to underwrite a USD150 million equity injection.
Asia Resource Minerals needs to refinance due to the need to fund debt repayments of USD450 million in bonds by July 8 and USD500 million in March 2017. Pressure on thermal coal prices has compromised the company's ability to repay its debt, while there have been distractions from Amir Sambodo, the company's former chief executive, who has taken control of Asia Resource Minerals' operations in Indonesia, where it indirectly owns 84.7% of PT Berau, which indirectly owns 90% of Berau Coal.
Asia Resource Minerals has warned that Sambodo's actions have caused payments to some mining contractors to be delayed, which could cause the contractors to take insolvency actions against Berau in the Indonesian courts.
One determinant as to whether the takeover proposal can proceed concerns arrangements between Asia Coal Energy Ventures and Austria's Raiffeisen Bank, which controls 23.81% of the voting rights in Asia Resource Minerals. The vehicle wants to buy the lender's equity stake and a package of loans it made to companies associated with the former chairman of the coal mining company.
According to NR Holdings, "certain third parties carried out extensive due diligence and made offers to purchase the shares in the company and related loans from RBI (Raiffeisen Bank International)".
"Having regard to the value ascribed to the shares in the company, by those third parties, NRH believes that the ACE offer price of 41 pence per share materially undervalues the company," NR Holdings said in a statement Wednesday.
Last month, NR Holdings and SUEK, the holding company for Russian coal producer OJSC Siberian Coal Energy Co, withdrew their intention to make a rival takeover offer for Asia Resource Minerals. Nevertheless, NR Holdings' offer to underwrite a USD100 million open offer remains on the table.
The voting rights controlled by Raiffeisen Bank were transferred to the bank from Samin Tan, the ex-chairman of Asia Resource Minerals, in October 2014, meaning that any move to acquire the company gives the Austrian lender a key role to play.
At 41p per share, Raiffeisen's stake is valued at roughly GBP23.5 million. The acquisition of Raiffeisen's equity stake in the company has been complicated by a move to buy a package of loans made by the Austrian bank to companies associated with Samin Tan, who has been deemed to be acting in concert with Asia Coal Energy Ventures, Sinarmas and Argyle Street Management.
Asia Coal Energy Ventures wants to pay USD85 million for the loans, which include commercial real estate, gold mining assets, tugs and barges, and a 24% stake in Jakarta-listed Borneo Coal, as it acquires Raiffeisen's equity stake.
The loan acquisition requires a so-called "fairness opinion" from Asia Resource Minerals' independent financial adviser, investment bank NM Rothschild & Sons, to confirm that the terms are fair and reasonable. Approval of the loan deal is required from the company's independent shareholders.
"All shareholders should therefore await the opinion that is required to be provided by the company's financial adviser that the terms of ACE's share and loan acquisition from RBI are fair and reasonable. NRH understands that the board of the company intends to provide details of the valuation conclusions, prior to putting this issue to independent shareholders for a vote pursuant to Rule 16," NR Holdings said in a statement.
Rule 16 of The Takeover Code is designed to ensure against some shareholders being given favourable treatment at the expense of other shareholders.
"In some cases, certain assets of the offeree company may be of no interest to the offeror. There is a possibility if a person interested in shares in the offeree company seeks to acquire the assets in question that the terms of the transaction will be such as to confer a special benefit on him; in any event, the arrangement is not capable of being extended to all shareholders," according to Rule 16.2, hence the requirement for a fairness opinion.
In a statement issued later on Wednesday, Asia Coal Energy Ventures said that Spinnaker Capital Ltd, an emerging markets investment manager with a 3.52% stake in Asia Resource Minerals, currently intends to support the loans acquisition agreement. Spinnaker joins HT Investment Development Ltd, which owns about 1.2% of the company, in providing a letter of intent to Asia Coal Energy Ventures.
In addition, Asia Coal Energy Ventures said it has been "assisting" Asia Resource Minerals' financial advisers in "carrying out the work necessary to reach their decision" on the fairness opinion. The deadline by which the offer document must be published has been extended to June 11 "to allow additional time for this process", according to Asia Coal Energy Ventures, which had been due to publish an offer document by Thursday this week.
Asia Resource Minerals responded in support of the delay to publishing the offer document, pointing out that it is "more appropriate" for shareholders to receive details of the offer once its financial adviser reaches a decision on the fairness of the loans acquisition deal.
Shares in Asia Resource Minerals have been suspended at the company's own request since May 22, when the company said it was working to regain control of its operations in Indonesia from Sambodo.
By Samuel Agini; [email protected]; @samuelagini
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