The Takeovers Panel has opted to steer clear of intervening in Energy Resources of Australia's $880 million offer, which could give Rio Tinto full control of the uranium miner.
Cottesloe fund manager Willy Packer says he and fellow shareholders in Energy Resources of Australia have been placed in an invidious position after failing to block a deal that could give Rio Tinto full control of the company.
Today, the Takeovers Panel ruled not to intervene in ERA’s $880 million entitlement offer, which could pave the way for major shareholder, Rio, to buy out the remaining shareholders, one of which is Packer & Co, at a low price.
Last month, ERA announced the $880 million entitlement offer at a heavily discounted price to fund the costly rehabilitation at its Ranger mining area in the Northern Territory, which is being managed by Rio.
It came after ERA’s Jabiluka mineral lease - a nearby undeveloped uranium deposit near the Kakadu National Park - was blocked by the Northern Territory government in July.
The decision not to renew the lease will result in the site being incorporated into the national park in line with calls from native title holders - a move Rio supported - who have long opposed a mine being built.
In contrast, Mr Packer and other shareholders have been vocal in their support for the development of a uranium mine.
Rio, which already owns 86 per cent of ERA, has committed to take up its share of the entitlement offer.
If no other shareholders participate, its stake could increase to 99.25 per cent.
Rio told ERA that if its stake climbs over 90 per cent, then it intended to proceed with a compulsory acquisition at the price of 0.2 cents apiece, being a hefty discount.
But in an attempt to halt the offer, shareholders Packer & Co and Zentree Investments submitted an application to the Takeover Panel seeking a declaration of unacceptable circumstances.
The two shareholders argued that the offer was only designed to increase Rio’s voting power and give it a leg up to acquire the uranium player.
Packer and Zentree said ERA and Rio were “taking advantage” of the ongoing litigation of the Jabiluka mineral lease while the miners’ prospects are uncertain.
The pair also said minority shareholders did not have equal opportunity to participate in what they said would be substantial benefits accrued by Rio.
Also, in the application to the Takeovers Panel, the shareholders called for a number of actions to restrain and restrict ERA and Rio in a bid to deter the acquisition.
Today, the Takeovers Panel declined to conduct proceeding into the affair, and concluded there was no reasonable prospect that it would make a declaration of unacceptable circumstances
In its decision, the panel said it considered that ERA’s independent board committee took appropriate steps to try and mitigate the potential control effect of the raising.
"The panel was not minded to second guess the Independent Board Committee’s decisions regarding the proposed equity raise, including in relation to ERA’s need for funds, the timing or quantum of this need, the assessment of alternate funding sources and strategies, and the structure of the rights issue," it said in a statement.
Mr Packer spoke out against the decision.
“I have never seen a company have a rights issue, let alone a $800 million issue, when its only asset is subject to a legal case,” Mr Packer said.
“It places the 9,000 shareholders who are being asked to contribute $100 million in an invidious position with no information as to the possibility of ERA successfully recovering one of the world's largest uranium deposits.”
ERA told the market this morning that it now intended to proceed with the offer “as soon as possible”.
A Federal Court hearing over the Jabiluka mineral lease is set for October 28.
Should the lease remain blocked, it would end Rio’s association with the politically charged commodity, after selling off its other uranium assets in the 1990s.
A ban on uranium mining in Western Australia has been in place since 2017.
Rio declined to comment.
