The Offer from Psons

According to the Takeovers Panel Reasons for Reasons for “Decision Celamin Holdings NL [2014] ATP 22”

On 3 November 2014, after discussions between Psons and Celamin, Psons put a proposal to Celamin which involved a placement to Psons for 19.99% of Celamin at 3.5 cents per share as well as a loan and further equity funding (subject to shareholder approval) totalling up to $8 million.

On 4 November 2014, Celamin announced the rights issue. It was partially underwritten by Patersons, a professional underwriter, up to $7.575 million.

On 5 November 2014, Psons’ proposal was rejected by Celamin.

Polo and African Lion committed to taking up their entitlements under the rights issue and agreed to act as priority sub-underwriters up to $3 million each.

Celamin’s Chairman, Mr Martin Broome, and its Managing Director, Mr Nic Clift, also agreed to act as priority sub-underwriters up to $100,000 each. Mr Broome and Mr Clift do not hold Celamin shares.

Collectively, the priority sub-underwriters committed to contributing $6.2 million towards the rights issue.

Under the terms of the sub-underwriting arrangements made by Patersons, priority sub-underwriters will have their commitments filled in priority to general sub-underwriters. An additional amount of approximately $1.375 million has been sub-underwritten by clients of Patersons as general sub-underwriters.

All sub-underwriters are entitled to receive a fee plus one option (exercisable at 2 cents per share and expiring in February 2016) for every two shares sub-underwritten. (Well below Pson's 3.5 cents per share offer)

The offer document for the rights issue disclosed that, if approval for the issue of sub-underwriter options was not granted, Celamin was required to make an equivalent cash payment to the value of the options.

The offer document also disclosed that, on a fully diluted basis taking into account the full exercise of all sub-underwriter options, if no shareholders took up their entitlements, Polo could increase its holding to 34.98% and African Lion to 34.88%.

In fact after the placement Polo ended up with 33.23% and African Lion 33.08% of Celamin. This exceeds the normal 19.99% cap, in other words take over by stealth.

Why was the Pson’s offer at 3.5 cents per share never put to Celamin’s shareholders?