I have notice some speculation on the UK and Aust BB's with regards to a possibility of Rio taking over KAH to get control of EXT.
Initially I though that the normal take over rule would apply, that is, as this would put Rio over the 20% limit they would be required to make a full take over offer for EXT as well.
However Section 611 of the Corporations act allows for various exceptions to the takeover provisions.
One of the exceptions is:
A Downstream acquisitions that results from acquisition of another company is exempt.
So ,company A (RIO) owns shares in company B (EXT). Company C (KAH) also owns shares in company B (EXT). Company A (RIO) can buy out company C (KAH) and by default will acquire more shares in company B (EXT).
This acquisition is exempt from takeover triggers.
On further investigation it seem that the mater could be referred to the Take-Over Panel.
It seems to me that this exemption would most likely not be allowed by the Take-Over Panel, as it could be clearly shown that the only value of KAH to Rio is their 40% holding in EXT. I do not see how Rio could mount a credible case that they only bought KAH for its other assets and it is just a default that they would end up with another 40% of EXT.
It has also been pointed out that Mr Dattels would block any take over of KAH without a take over of EXT due to his investment in EXT via Polo and directly.
However what if Mr Dattels decided that it was best to keep his direct investments and Polo's in EXT, and benefit from the considerable upside. He would still get cashed up from a KAH take-over, from his direct and indirect investments in KAH?
Rio would end up with around 62% of EXT, they could continue to increase their holding at 3% every 6 months up until they are at a level they are comfortable with. They seem to be happy with around 68% in Rossing and ERA.
It would be up to EXT to decide if they refereed it to the Take-Over Panel and in the above scenario I'm not sure that they would?
In the short term this scenario may have a negative effect on EXT's SP but in the longer term any shareholders that stayed on for the ride would be rewarded far greater that any short term gain from a take over.
Food for thought.
Regards
Steve
EXT Price at posting:
$7.42 Sentiment: LT Buy Disclosure: Held
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