7th May 2015 12:24
LONDON (Alliance News) - Asia Resource Minerals PLC Thursday received a takeover offer valuing its equity at GBP98.8 million from Asia Coal Energy Ventures, a vehicle funded by Indonesia's Sinarmas Group, in what is the clearest threat yet to the plan proposed by financier Nat Rothschild to recapitalise the coal mining company he helped to found.
The formalisation of the takeover offer marks a ramp up in a battle for control of the Indonesia-focused coal miner, pitching Rothschild against Indonesian investors backed by an Asian hedge fund. That battle comes as the company is being hit by low coal prices and as it faces the need to repay USD450 million of notes in July this year and USD500 million in March 2017.
Managed by hedge fund Argyle Street Management Ltd, which holds a 4.65% stake in Asia Resource Minerals, the Asia Coal Energy vehicle said it is offering 41 pence per share for the shares in the coal miner it doesn't already own, a 173.3% premium to the closing price on April 13, the day before it said it would make a bid, and a 198.0% premium to the 30-day volume weighted average price leading up to that date.
If it wins the takeover battle, Asia Coal Energy said it would also underwrite a pre-emptive capital raising by Asia Resource Minerals of USD150 million at a price of at least 28.0 pence a share. It would use the money raise to reduce Asia Resource's debt, to exchange bonds due in 2015 and 2017, and to fund operations.
The former chairman of Asia Resource Minerals, Indonesian investor Samin Tan, is working in concert with Argyle and the vehicle it manages, according to the UK's Takeover Panel.
Asia Coal Energy said it has secured a deal with Austria's Raiffeisen Bank, which has a key role to play in the power battle after taking over 23.8% of the voting rights in Asia Resource Minerals from Samin Tan in October 2014, under which the vehicle will buy loans owed to the bank by Tan companies.
Asia Resource Minerals said that Asia Coal Energy didn't engage with it over the offer before the announcement.
Nat Rothschild, whose NR Holdings is considering a counter offer with SUEK PLC, the holding company for Russian coal producer OJSC Siberian Coal Energy Company, controls 17.5% of the voting rights in Asia Resource Minerals, while Tan still controls a further 23.8%.
Kin Chan, partner at Argyle Street Management Ltd, said Asia Coal Energy's offer provides a "full cash alternative at a significant and firm premium" for shareholders in Asia Resource Minerals, as well as the inclusion of an "intention to inject more equity finance and provide a genuine operational platform for the coal asset in Indonesia to seek to generate returns for all stakeholders".
"The offer provides a long term future for the Berau coal assets crucially including support by Sinarmas, a substantial Indonesian conglomerate with existing coal operations as well as a growing energy generation business within Indonesia," Chan said in Asia Coal Energy's statement.
The offer means Asia Coal Energy is now firmly pitched into a battle with Nat Rothschild over the future of the Asia Resource Minerals, which was spun out of Bumi PLC when the parties that controlled that company fell out and battled for control.
Rothschild's NR Holdings Ltd and SUEK revealed the possibility of launching a cash offer for Asia Resource Minerals on April 20, just days after the potential for a bid by Asia Coal Energy was first disclosed to the market, conditional on shareholders voting in favour of a recapitalisation backed by Rothschild.
Rothschild has offered to underwrite a USD94 million equity fundraising as part of a broader refinancing that would also involve the restructuring of Asia Resource Minerals' debt. NR Holdings had said it believes that the refinancing was the only option available that would "preserve value for ARMS shareholders in the short to medium term".
Asia Resource Minerals said it got valid acceptances for 37.9 million shares under the open offer when it closed last month, or 14.0% of the shares on offer. The shares not taken up will be taken up by NR Holdings, and 271.0 million new shares are still set to be admitted for trading, representing 52.9% of the company's enlarged share capital, and raising net proceeds of GBP62.8 million. The offer was priced at 25 pence a share.
However, the open offer is conditional on being approved by the company's shareholders at a meeting on May 14.
"The possible NR Holdings/SUEK offer is a last minute reactive attempt to revive NR Holdings' opportunistic plan to take control of ARMS through the open offer. No firm offer has yet been made to ARMS shareholders by NR Holdings/SUEK, no clarity on the proposed offer price has been provided and, if an offer were made without a supportive Indonesian partner, it would not address the key issue of local partnership which ACE considers to be essential to a successful outcome for all ARMS stakeholders including bondholders, employees and the wider local economy," Argyle's Chan said on Thursday.
"Shareholders should therefore reject the NR Holdings underwritten open offer in the General Meeting on 14 May," he added.
NR Holdings had previously hit out at the potential offer from Asia Coal Energy Ventures, saying it provides neither the company nor its shareholders with any certainty.
"NR Suek has 53 days in which to table a counter offer, something that it fully intends to do," a NR Holdings spokesman told Alliance News Thursday.
A key element at play in the battle for the company is that 23.81% of the voting rights in Asia Resource Minerals were transferred to Austria-based Raiffeisen Bank from Samin Tan in October 2014. Tan, an Indonesian investor who used to be the chairman of Asia Resource Minerals, is still able to control indirectly a further 23.8% stake.
Asia Coal Energy said it has received an irrevocable undertaking to accept the offer from Ravenwood, the vehicle holding the 23.81% stake that's now controlled by Raiffeisen Bank.
The vehicle said its deal with Raiffeisen means it is set to buy loans owed to the Austrian bank by Tan companies for USD120 million minus the money that will be raised by selling the 23.81% stake. If the takeover offer fails, it will still have to pay USD35 million to the Austrian bank.
However, the deal is highly conditional.
Independent shareholders of Asia Resource Minerals must approve the loans agreement between Raiffeisen and Asia Coal Energy. The terms of the acquisition of the loans must also be deemed "fair and reasonable" by Asia Resource Minerals' independent financial adviser for Ravenwood's irrevocable undertaking to be anything more than conditional. Investment bank NM Rothschild & Sons, which is independent of Nat Rothschild, is Asia Resource Minerals' financial adviser.
"Neither the Company nor its independent financial adviser has received the information required for the independent financial adviser to provide any such opinion," Asia Resource Minerals said in its statement.
Asia Resource Minerals noted that Asia Coal Energy's offer is conditional on independent shareholders voting in favour, as well as the approvals over the loan acquisitions and the associated agreements.
Raiffeisen has the right to sell the loans to any third party prior to completion of the sale to Asia Coal Energy, subject to approval from the Takeover Panel.
Asia Coal Energy said its takeover offer for Asia Resource Minerals is being funded by a GBP97 million credit facility being provided by Sinar Mas Multiartha, an Indonesian financial services provider that's part of the congolmerate Sinarmas Group.
Bumi was co-founded by Rothschild and the Bakrie family of Indonesia. The Bakrie family made an exit from the company in 2014, when it sold its 23.8% interest to Tan after a long battle over control of Bumi.
Asia Resource Minerals shares were up 4.1% at 39.82 pence on Thursday afternoon.
By Sam Agini and Steve McGrath; [email protected]; @stevemcgrath1; [email protected]; @SamuelAgini
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