West Perth-based Berkeley Resources has revealed it is in takeover talks with Russian-based steelmaker OAO Severstal.
West Perth-based uranium developer Berkeley Resources has revealed it is in takeover talks with Russian-based steelmaker OAO Severstal.
In a statement to the Australian Securities Exchange, Berkeley said that Severstal, "would consider making a conditional all cash proposal for all of the outstanding shares of Berkeley."
Severstal has indicated it may make a cash offer from Berkeley at a price of $2.00 per share.
The two companies have already entered into a Subscription Rights Deed, whereby Berkeley had granted Severstal the right to subscribe for approximately 16.3 million new shares in Berkeley at $1.70 each.
This represents about 9.1 per cent of the fully diluted share capital of Berkeley.
"In the even that Severstal publicly announces a takeover bid for the Company at a price of $2.00 per share, Berkeley's Directors would unanimously recommend that shareholders accept that offer, in the absences of a superior competing proposal," the ASX statement said.
Today, Berkeley also announced plans for a $4.8 million placement at $1.45 a share.
"Berkeley has made significant progress to date in developing the Salamanca Uranium
Project and establishing significant JORC compliant mineral resources," said Berkeley managing director Ian Stalker.
"We are now at a point where we are confident that we can recommence mining operations at one of the leading undeveloped uranium deposits in the world, and plan to enter into production towards the end of 2012," he said.
See company statement below:
The Directors of Berkeley Resources Ltd. ("Berkeley" or the "Company") advise that it has been approached by, and is presently in discussions with, OAO Severstal ("Severstal"), one of the world's leading integrated steel and mining companies, to agree the basis on which Severstal may make a proposal to acquire control of the Company.
Severstal has indicated to the Company that, subject to Severstal completing and being satisfied with the results of financial, technical and legal due diligence and the entry into an implementation agreement which is on terms satisfactory to the Company and Severstal, it would consider making a conditional all cash proposal for all of the outstanding shares of Berkeley (the relevant conditions to the proposal would be specified by Severstal in an announcement to the market if it resolves to proceed with such a proposal).
Berkeley has entered into a Subscription Rights Deed with Severstal whereby it has granted Severstal the right to subscribe for approximately 16.3 million new Berkeley shares at a price of A$1.70 per share, subject to the condition that Severstal publicly announces an intention to proceed with a takeover bid for the Company at a price of A$2.00 per share (any such takeover bid would be subject to conditions). The shares that may be issued to Severstal pursuant to the Subscription Rights Deed would represent approximately 9.1% of the fully diluted share capital of Berkeley (including the shares issued pursuant to the approximately A$4.8 million placement announced today (and referred to below), the shares issued as part of the placement fee, the approximately 16.3 million Severstal subscription shares and the currently outstanding options). Severstal's right to subscribe for shares in Berkeley will expire on 10 December 2010, unless it has announced an intention to proceed with such a takeover bid on or before that date. A summary of the key terms of the Subscription Rights Deed is contained in Annexure A to this announcement.
In the event that Severstal publicly announces a takeover bid for the Company at a price of A$2.00 per share, Berkeley's Directors would unanimously recommend that shareholders accept that offer, in the absence of a superior competing proposal.
An offer price of A$2.00 per share would represent a premium of approximately 40% to the volume weighted average price of Berkeley shares traded on the ASX in the three months from 29 July 2010 to 28 October 2010 (each date inclusive) of A$1.43.
At an exchange rate of 1.63 (being the exchange rate at the close of business in London on 28 October 2010) the offer price of A$2.00 per share would amount to an offer price of approximately £1.23 per share.
OR PROPOSED, THERE IS NO GUARANTEE THAT IT WILL BE AT A PRICE OF $2.00 PER SHARE.
BERKELEY IS NOT SUBJECT TO THE UK CITY CODE ON TAKEOVERS AND MERGERS. HOWEVER, IT IS SUBJECT TO THE TAKEOVER RULES CONTAINED IN THE AUSTRALIAN CORPORATIONS ACT 2001.
Severstal has no obligation to make a takeover bid or any other proposal for the Company
under the Subscription Rights Deed or under any other arrangements.
Berkeley's Salamanca Uranium Project has the potential to be a leading uranium project and is scheduled to commence mining by late 2012. However, there are considerable financing requirements to bring this uranium project into production and it is appropriate at this stage that the Board considers its financing options in the interests of shareholders. The Board believes that it is likely that the terms offered by Severstal are more appealing than those currently available via project or equity financing.
In the event that Severstal resolves not to make a takeover bid for the Company, Berkeley plans to continue discussions regarding financing alternatives with third parties, which may include Korean Electric Power Corporation (KEPCO). In accordance with the terms of the Subscription Rights Deed, Berkeley has agreed to suspend all discussions with KEPCO and any other interested parties until such time as it receives notification from Severstal of its intention not to proceed with a takeover bid or until 10 December 2010.
MANAGEMENT CHANGES
If Severstal decides to proceed with a takeover bid for the Company and exercises the Subscription Rights Deed, Severstal will have the right to appoint one Director to the Board of Berkeley. If Severstal decides to proceed with a takeover bid and it acquires more than 50% of the shares in issue and the takeover bid becomes wholly unconditional, Severstal will be offered the majority of the Board seats of the Company, including the Chair of the Board.
Severstal has not yet confirmed what its intentions would be in relation to Board representation in either such scenario.
PLACEMENT FOR INTERIM FUNDING
If Severstal decides to proceed with a takeover bid for the Company, the bid process may take approximately three to four months to complete, and possibly longer. In these circumstances, the Directors consider it prudent to ensure adequate working capital is in place for the ongoing Feasibility Study work in relation to Berkeley's Salamanca Uranium Project for at least that period. The Company has therefore resolved to issue a total of approximately 3.3 million shares at an issue price of A$1.45 per share to a sophisticated investor for gross proceeds of approximately A$4.8 million. Should Severstal decide not to proceed with a takeover bid for the Company, Berkeley has the option to issue approximately 7 million further shares at an issue price of A$1.45 per share for gross proceeds of approximately A$10.2 million to the same sophisticated investor at any point on or before 31 January 2011, subject to shareholder approval. As consideration for the placement, the Company will issue 200,000 shares to the sophisticated investor or its nominees.
The Directors believe that this funding option will ensure that the Company will have adequate working capital to pursue its near-term obligations.
Mr. Ian Stalker, Managing Director of Berkeley, commented:
"Berkeley has made significant progress to date in developing the Salamanca Uranium Project and establishing significant JORC compliant mineral resources. We are now at a point where we are confident that we can recommence mining operations at one of the leading undeveloped uranium deposits in the world, and plan to enter into production towards the end of 2012. Our anticipated graduation from developer to producer would prove to be well timed given our belief that uranium supply is expected to go in to deficit over the next two years.
Severstal is considering an offer that represents a solid premium to the recent share price and has substantial financing available to optimise the re-commissioning of the Project. It also has positive experience cooperating with Spanish companies and runs assets in Russia, Ukraine, Kazakhstan, the European Union, North America and Africa. We look forward to updating shareholders with further details in due course."