Chinese investment group Wah Nam International has moved to gain full ownership of iron ore company Brockman Resources, through a takeover pitched at less than half the value of its original offer.
Wah Nam announced today it would offer $1.50 cash plus 18 Wah Nam shares, valuing its offer at $3.15 per Brockman share.
That is a premium of 59 per cent over Brockman’s weighted average share price over the past 90 days.
Wah Nam’s original takeover, launched in November last year, comprised an offer of 30 Wah Nam shares for every Brockman share, with an implied value of $6.47 per share.
That offer would be worth $2.55 per Brockman share currently, because of the decline in Wah Nam’s share price and changing currency values.
The original takeover offer enabled Wah Nam to lift its shareholding from 22.6 per cent to a controlling 55.3 per cent.
Brockman’s independent directors have unanimously recommended that shareholders accept the new offer, which values the company at $456 million. The cost of acquiring the outstanding 45 per cent will be about $204 million.
Joint deputy chairman Ross Norgard said the independent directors believe the offer “is in the best interests of Brockman shareholders, providing an attractive premium over recent trading levels and allowing shareholders to realise value through the receipt of cash, as well as retaining exposure to the upside potential from the Marillana iron pre project”.
Interim chief executive Colin Paterson said that if the offer succeeds, “the consolidated shareholding structure should improve the ability to secure funding for the Marillana iron ore project”.
Wah Nam plans to fund the cash component of the offer by using existing cash of $33 million and by raising approximately $74 million from the following: a $42 million share placement and a $22 million convertible bond issue to current shareholder Ocean Line Holdings, and a $10 million placement to Reorient Financial Markets.
Brockman’s advisers are UBS and Freehills.
Wah Nam’ advisers are E.L.&C. Baillieu and Reorient and Clayton Utz.