Eurasian Share Discussion Threads

[matt123d] 23/6/2013 10:49

*ENRC HOLDERS TO BE OFFERED $2.65/SHR CASH, 0.230 KAZAKHMYS SHRS*BIDCO: OFFER VALUES ENRC AT 3.04B PNDS AT CURRENT FOREX RATE

[tanzz786] 22/6/2013 22:38

New £3bn offer to take ENRC private
The founders of the mining giant ENRC are poised to table an unchanged £3bn offer in order to take the troubled company off the London market.

It is understood that the founders, led by Alexander Machkevich, will tomorrow table a firm version of an indicative offer which in May was rejected by independent directors. The offer will actually value ENRC at less than the earlier indication.

Despite that, the move is likely to be accepted by a committee of independent directors because of the lack of other options and the wider sell-off in mining stocks.

The move, if accepted by minority investors, will trigger the departure of ENRC from the London Stock Exchange after a turbulent six years in which directors have been ousted and the Serious Fraud Office (SFO) has been carrying out an investigation.

Sir Richard Sykes, the non-executive director, said at the height of its problems in June 2011 that the company should never have been listed in the first place. He also accused the company's chairman and chief executive at the time of being "in the pocket" of its founding shareholders.

The fully financed offer is expected to be announced by the consortium which accounts for 56pc of ENRC's investors including the Kazakh government's 12pc stake, ahead of a Takeover Panel deadline of 5pm tomorrow .

The offer is expected to be the same as that originally tabled on May 16, offering 175p-a-share in cash and 0.231 shares in Kazakhmys for each ENRC share.

At the time, it valued each ENRC share at 260p. However, due to exchange-rate differences since then - the consortium's financing was arranged in dollars by bankers led by Société Générale - and the fall in Kazakhmys's share price, the offer is actually worth less.

At the time the approach was made, Kazakhmys's share price stood at 370p. However, at Friday night's market close, the share price of the Kazakh miner stood at 272.13p.

As a result, the offer values ENRC shares at 238p each, before taking into account the currency fluctuations. On Friday, Macquarie analyst Alon Osha set a target price of 236p for the offer, some 10pc below the original, but above Friday night's closing price of 216.9p.

One source said that the terms of the initial offer "were never going to change," suggesting that the founders feel there is nothing to be gained in reputational terms from upping the offer.

It is understood that, despite the decreased value, the independent committee set up to consider the approaches will reluctantly recommend it to shareholders.

Sources this weekend indicated that the seven-strong committee, chaired by former World Bank director, Mohsen Khalil, is likely to set out the difficult nature of the task in an attempt to absolve themselves from blame from minority investors.

In late May, Mr Khalil instructed bankers Lazard and Credit Suisse to work separately to establish the value of the miner, asking them to develop valuations based on a number of variables, including competitors, its economic value were it to be sold and a sum-of-the-parts model.

In deciding whether to accept the approach, the committee will know that were they to reject the offer, and the consortium walk away, the company's share price would slide significantly, making it cheaper to table a lower offer in the future.

As a result of the complex deal, the Kazakh government's stake in Kazakhmys - which has a 26pc stake in ENRC - will reduce to zero, and its free float will increase to 58pc. It is listed in London.

ENRC was listed on the London Stock Exchange in December 2007 after raising £1.36bn, the second-biggest stock market float of the year.

The company, which mines coal, iron ore and ferrochrome among other minerals, floated at a share price of 540p, valuing it at £6.8bn.

ENRC was founded by three Kazakh businessmen - Mr Machkevich plus Patokh Chodiev and Alihan Ibragimov - in 1994.

In March 2008, four months after floating, it became a member of the FTSE 100 index, hitting highs of £12.50 in 2010. But by December that year , the company's problems began, when Sir Richard and other independent directors, including Ken Olisa, began to question the way the board operated.

By March 2011, solicitors Herbert Smith were hired by the independent directors to ask about the ramifications of resigning en masse.

In June that year, Mr Olisa coined the term "more Soviet than City" to describe the company after he and Sir Richard were voted off the board by its Kazakh shareholders.

Mehmet Dalman, a former Commerzbank banker, was drafted in as chairman shortly afterwards, pledging to clean up the business.

But Mr Dalman resigned in April this year saying he had "achieved all that I can".

The SFO continues to work on its criminal investigation into the miner, looking at allegations of fraud, bribery and corruption related to its business in Kazakhstan and Africa.

Adding to the pressure for the company to go private, the UK Listing Authority has asked that the group increase its free float to 25pc from 18pc by January 2014 or leave the market.

[karmastuartra] 22/6/2013 07:43

Wrong faza,something or nothing lost,stake remains in enrc.
all miners are suffering,not just kaz and enrc,a low ball bid was rejected
once and can be again.as long as you own your shares and can ride it out,
the city can short as much as it wants,at some point the tide will turn.

[faza3] 21/6/2013 18:19

I think Kazakhmys will say yes to $900 million of cash and 77 million of its own shares.kaz shares should be 350 -400 after the deal

something or nothing

[faza3] 21/6/2013 17:47

Kazakhmys support is essential to any bid. Ultimately it will need to put any offer to its own shareholders but without at least tacit support for the mooted offer no bid is likely to be put forward at all, the sources said.

Kazakhmys, which has long sought to resolve the problem of its large stake in ENRC said last month it could back an offer. Sources familiar with the matter said then that it supported the structure of a cash-and-share proposal which, even at original levels, would mean almost $900 million of cash for Kazakhmys and 77 million of its own shares.

This at a time when the company is investing to boost production. It would also lift Kazakhmys's free float of readily tradeable shares, while removing the government as a key shareholder and the ENRC headache.

Kazakhmys, ENRC and representatives of both the bidding consortium and ENRC independent directors declined to comment

[karmastuartra] 21/6/2013 14:40

honesty dosent apply to the city,that way of life went long ago.
who can you trust,bankers? politicians?
city traders?

[faza3] 20/6/2013 21:30

I'm not surprised they want to withdraw from the stock exchanges and be a private
Total waste of time to be here
a few guys bought computers and software, and they do what they want with company value They make it easy for oligarchs to go private and maybe this is their objective

[racg] 20/6/2013 19:34

Isn't looking good. Oh well. I m at the total capitulation phase emotionally. Is kerimov going to bale us poor mug punters or not?

[careful] 20/6/2013 18:29

These guys have had luck if they wish to pitch a low ball offer.
a perfect storm, the whole future of miners is being questioned.
it has been a very long, almost endless 3 week extension.

we shareholders needed better luck than this.
hope they do not steal it from us.

[racg] 20/6/2013 09:25

Ok maybe i m going over the top against shugs. I ll play nice.

[racg] 20/6/2013 09:03

If he is right he will crow and crow,if he is wrong he ll vanish from the thread. That is my prediction. If he makes a nimble apology and genuflects on his knees then I will take my top hat off for him.

[careful] 20/6/2013 08:57

5 o'clock monday,deal deadline
will sugs get his comeuppance?
worth waiting around to read his humble apology.
..but what if he's right.

[racg] 20/6/2013 08:53

And if you have a dagger in hand, when patting yourself on the back, well, make it a very vigorous pat on the back then.

[shugsy] 20/6/2013 08:41

Understood flowers.

[dflowers68] 20/6/2013 08:32

Shugs - You're absolutley right, however spare a thought for those that bought a lot higher, before all this nonsense started, they may not have funds to add. Thankfully I'm not one of those people but if I were I wouldn't want your doom and gloom posted all over this board! You've made your point, perhaps it's time to quietly pat yourself on the back now?

[shugsy] 20/6/2013 08:10

Not always pessimistic flowers, only just before it falls and I'm proved right.

This game is about buying low and selling high my friend and judgement plays a major part.

Karma - As I've mentioned before surprised to see it go this low but they must be shorting the living daylights out of Kaz which in turn drives the price lower here. Lets just hope the bid materialises otherwise further negativity will ensue.

[karmastuartra] 20/6/2013 07:51

sorry shugs,only two more days to moan obout enrc.

[dflowers68] 20/6/2013 00:11

Dow tanking, ftse falling, shares tumbling, blah blah blah - I wonder shugsy, are you always this pessimistic, you must be real fun guy to be around. It may surprise you but on the odd day you get big rises too, bet you hate those days though don't you?

[shugsy] 19/6/2013 21:28

With the Dow falling it looks set to see 200 this week.

[lebiche] 19/6/2013 14:07

Technically, it's going much lower.

[faza3] 19/6/2013 13:17

he should buy KAZ I mean Suleiman Kerimov if this is true

[harmeet1981] 19/6/2013 12:54

copied this from the KAZ board, which way do you guys the deal will be heading?:


This is SBM's take on were we are at. hxxp://www.-.com/blog/enrc-conundrum-game-theory.html

As we race down to the 2nd deadline of next Monday at 5PM for the 3 oligarchs to table a firm bid for ENRC (and there is unlikely to be a 3rd extension), we find ourselves in an intriguing game theory situation.

Given that the independent Board of Directors rejected the last offer as "materially undervaluing" (their words not ours) ENRC (and this was at an equivalent price of 260p), with the price of KAZ continuing to plumb stupid depths, it is indeed an interesting conundrum that the oligarchs and the Board find themselves in... The market was wrong footed previously bidding ENRC stock up to nearly 320p in the days ahead of the deadline, and with metal prices under pressure again in recent days taking the shares lower, question is has the market now got it wrong in reverse this time?

We are in fact now in the somewhat peculiar situation of ENRC's shares trading just less than where they were before the bid announcement and the bid already being rejected by the BoD as inadequate. Go figure that one...

We highly doubt, for all the reasons opined on this blog in recent weeks, that the 3 oligarchs want the company to remain in the public eye and the legal maneouvring in recent weeks to enable them to see the bid through points to some type of final offer being made. And so we come to one of 3 possible conclusions to this unique situation -

1. The oligarchs do not bid and, at face value, call the markets bluff. They only hurt themselves here however as the stock will likely fall back towards 200p AND, instead of getting the company on the cheap, they actually have to dilute themselves to meet the UK listing rules requirements. This dilution is the polar opposite of what they were/are trying to achieve. The other point is they would be restricted from bidding for a further 6 months at which point the commodities spectrum, in particular iron ore, may bounce back and so lift the ENRC valuation. Of course the SFO investigation is all aired in public too. I just don't see this as a likely outcome but between this Kaz and AVM the market has thrown egg on my face this last 4 months so don't discount it.

2. A final bid tabled on the same terms. Given that they cannot increase the KAZ shares component as this is a fixed sum (ie the Kazakhstan Govt hold a fixed number of KAZ shares), then the new bid is presently worth just 244p at the current KAZ price. Highly doubtful the independent BoD will sanction this and so we would be in the somewhat unusual situation of a Company's Board actively pushing minorities to vote against the main shareholders. Net effect - more mess, likely further weakness on KAZ's price, and so an even less value end bid.

3. A decent increase in the cash component (likely to 220-25p) that has the independent BoD acquiesce and, in all probability, keeps Suleiman Kerimov's peace (he has supposedly written to the Company's Board pushing for 400p or thereabouts). Again, per (2), the KAZ component is fixed and so through raising the cash element from a real steal to just a steal, the net effect on KAZ's stock price as the company would receive more cash for their stake in ENRC, will be to finally break the downtrend from over 800p and probably take the stock price back towards 400p (which as you can see from below is what the wedge break pressages). At a 400p KAZ stock price and with 225p in cash the bid for ENRC would be worth approx 317p.



The bit that I am trying to get my head around is why Vladimir Kim would be happy to allow a low ball offer to be pushed through. He has pledged 91m of his shares for personal loans unrelated to KAZ. Probably when KAZ was substantially higher than it is today. Any further fall in the price of KAZ could mean he may be forced to sell his shares to raise the funds to repay those debts.