Puzzle over FMG share holdings

Fortescue Metals Group is home to two of Western Australia’s wealthiest company directors, or so it was believed until a surprise disclosure last month.

The iron ore miner has put its chairman, Andrew Forrest, into the ranks of the ‘super rich’, and has also made Peter Meurs a wealthy man.

But neither is as wealthy as we had previously believed.

Peter Meurs

The company disclosed last month that Mr Meurs’ shareholding in FMG had suddenly gone from 26.2 million to just 9.5 million.

There was no explanation as to whether the shares had been sold, or transferred.

Nor did the company explain why these shares were valued at $70 million – equating to a price of $4.21 per share, about double the prevailing market price.

The only explanation offered was “disposal of units in VN1 Unit Trust”.

The VN1 Unit Trust first came to light in 2011, when Andrew Forrest’s private company provided financial assistance to allow certain senior executives of Fortescue to purchase FMG shares on market.

The registered holder of these shares is an entity called Vertical Nominees, in its capacity as trustee of the VN1, VN2 and VN3 unit trusts.

Mr Forrest controls these trusts through special A-class units held by entities controlled by him.

Between August and November 2011, Vertical Nominees acquired 17.8 million FMG shares at a cost of $105.6 million.

As an investment, these purchases have been a dud – they were bought at an average of $5.93 per share compared with a current price of about $2.50.

Since 2011, Mr Forrest has acquired an interest in at least 42 million more FMG shares, at a cost of $172 million, or about $4.10 per share on average.

However, the company has not disclosed which entity purchased these shares.

Fortescue’s latest annual report shows that Mr Forrest has an interest in 1.037 billion shares, primarily through three different entities.

Andrew and Nicola Forrest’s private company, Minderoo Group, holds 917.5 million, AMNL Financing (a special purpose vehicle associated with Minderoo) owns 101.7 million, and The Minderoo Foundation owns 11.3 million.

It has been suggested Mr Meurs lost control of the FMG shares because he was unable to service the associated debt.

As Mr Forrest was the financier behind the deal, he could have ended up as their outright owner, but the company has not shed any light on this, saying it’s a private matter.

Mr Forrest’s ability to fund FMG share purchases – for his executives and himself – has been helped by the massive dividends he earned off the back of his one-third stake in FMG.

He was paid $51 million in dividends over the past year, and about $200 million in the prior year.

That would help Mr Forrest to not only buy FMG shares, but invest in other businesses and continue his philanthropic pursuits.

New investments this year include $2 million in convertible loans to A1 Consolidated Gold, and $3 million in shares and convertible notes to Impact Minerals.

These are in addition to two existing mining sector investments.

Forrest Family Investments has a 25 per cent stake in uranium stock Vimy Resources (worth $9.9 million), and a 17.2 per cent stake in nickel stock Poseidon Nickel (worth $6.9 million).

These investments have all been bundled under the banner of Squadron Resources.

Minderoo Group also has extensive pastoral and agricultural interests, including Harvey Beef, and an 8 per cent stake in biotech company Admedus (worth $9.9 million).

Mr Meurs has also dabbled in the biotech sector, with a 19.9 per cent stake in Sun Biomedical (formerly Dimerix Bioscience).

Former FMG director Graeme Rowley held 17.5 million shares when he retired from the company’s board last November, and it’s not known if that has changed.

Current managing director Nev Power has lifted his holding to 2.5 million shares.