Font Size:DecreaseIncreasePrint Page:Print Bryan Frith | May 27, 2009
Article from: The Australian THERE are some strange takeover battles in junior mining land.
Two of the most bizarre are the three-way contest involving Drillsearch, 3D Oil and Beach Petroleum, and that between Minemakers and Union Resources over Bonaparte Diamonds.
Drillsearch launched a scrip offer of four Drillsearch shares for each 3D, after obtaining pre-bid acceptance agreements on 19.9 per cent of the target's capital. 3D called the offer inadequate and recommended rejection.
In March, Malaysian businessman Dato Choo Beng Kai joined the Drillsearch board and managing director David Williams quit in disagreement at the bid for 3D.
3D also flagged that 37 per cent of the company's shares were subject to escrow by the ASX until May 22 and it couldn't accept the Drillsearch offer before that date unless the board, and perhaps ASX, gave prior written consent. Moreover, consent couldn't be sought until at least half of the non-escrowed shares had accepted the offer. Drillsearch replied that in such circumstances it was usual for a target company to seek a release from the ASX of the escrow arrangements.
On April 29, Drillsearch disclosed that two directors, the recently appointed Choo Beng Kai and Jim McKerlie, had called a meeting to remove the other three directors, chairman Peter Simpson, Peter Wicks and Russell Langusch. That trio responded by convening a meeting to remove Choo Beng Kai and McKerlie and both sides agreed to hold one meeting to resolve the matter. This commentator can't recall an instance of a warring board seeking to prosecute a takeover bid.
On May 5, Beach, which already owned just under 5 per cent of Drillsearch, announced a scrip offer of one Beach share for every 27 Drillsearch shares, after securing pre-bid agreements which would give it 13 per cent. The offer values Drillsearch at $50 million, or 3c a share, and is conditional on a minimum acceptance of 90 per cent and the Drillsearch bid for 3D not succeeding.
Carling Capital is advising Drillsearch in relation to the 3D bid but not on the Beach bid for Drillsearch -- that gig has gone to TC Corporate.
Interestingly, Max Carling was on the board of Drillsearch until October 21 last year when he left after a board restructure. Only days later, Carling Capital popped up with 15 million shares in 3D, equivalent to 12 per cent of the existing capital and 7 per cent on a fully diluted basis. Carling, which began buying on October 16, appears to face a conflict of interests because it stands to obtain success fees if the Drillsearch bid for 3D succeeds, but not if the Beach bid succeeds.
On May 15, Drillsearch announced the board had unanimously decided not to extend the closing date of May 26 and not to waive the 50.1 per cent acceptance condition. It had received acceptances of only 2 per cent.
On Monday, the day before the bid was to close, stockbroker Veritas Securities asked the Takeovers Panel to extend the Drillsearch bid on the grounds that the 3D escrowed shareholders, including Veritas entities, had neither a bidder's statement nor target's statement and had been denied the opportunity to accept, or even to consider the merits of, the bid.
Yesterday, instead of closing the bid, Drillsearch announced that ASIC had granted an exemption enabling the bid to be extended by two weeks to give escrowed holders the opportunity to consider whether to accept. Drillsearch has a relevant interest in 3D of 30.35 per cent. Separately, Drillsearch claimed that the board had agreed to a renewal process and therefore would be postponing the June 10 board contest meeting to July 31. Simpson disclosed he would be retiring as chairman, the board would be reconstituted to four or five, including the new managing director Brad Lingo and two new non-executive directors. But if the entire board is agreed on the "renewal process" why is there any need for a shareholder meeting? Could it be that Choo Beng Kai is not part of the agreement?
As to Bonaparte Minerals, it got a bid in March from Minemakers, which has three common directors, who said they would accept for their aggregate 11.7 per cent of Bonaparte in the absence of a superior offer and an independent expert concluding the offer was reasonable. Despite its name, the principal interest of Bonaparte is marine phosphate deposits off Namibia. Union also has phosphate in adjoining licences and the two companies have formed a venture to jointly develop their deposits, which have the potential to be a major global operation.
When Minemakers reached 22 per cent of Bonaparte, Union said it would be making a scrip bid, with a $4 million rights issue. By the time it secured underwriting and finalised bid terms, Minemakers was 44 per cent.
Minemakers has reached a 62 per cent controlling interest and has declared its bid unconditional. But Union isn't giving up and has waived its minimum acceptance condition. Moreover, the independent expert BDO Kendall has declared the Union bid superior to that of Minemakers, posing a dilemma for the Bonaparte directors as to their recommendation in relation to the Union offer.
Taking issue
IT'S piquant that a shareholder of Datadot Technology, which makes ID equipment using microdot technology, is trying to establish whether, under the cloak of a capital raising, parties have obtained significant influence over, if not control of, the company.
In March, Datadot announced a placement of 15 per cent of the capital and a 1-for-1 non-renounceable rights issue. Both were underwritten by KTM Capital, which specialises in raising equity for small-cap companies. The letter of offer for the rights issue disclosed that if the offer was subscribed to 50 per cent, KTM would emerge with 25 per cent of the company and if there was a 100 per cent shortfall, KTM would have 50 per cent.
The offer document added that KTM had advised that if it controlled the company it had no "present intention" to become involved in the management, to seek changes to the operations, or to appoint a director.
The placement was taken up 50-50 by two parties only, TM Consulting and Bannaby Investments. That gave TM 6.5 per cent of Datadot, while Bannaby, which already owned 2.7 per cent, went to 9.2 per cent.
The rights issue was subscribed to 66 per cent and the shortfall taken up by the same two parties, suggesting they might have been sub-underwriters. That gave TM 17.2 per cent of Datalot and Bannaby 19.2 per cent, an aggregate of 36.9 per cent, sufficient to give significant influence over, if not control of, the company. Bannaby is controlled by Keith Kerridge and TM by Todd McGrouther. They happen to be the founders of KTM Capital, and are directors and shareholders.
William McCleugh, who holds 3 per cent of Datadot after the placement and rights issue, yesterday complained to the Takeovers Panel. He contends that TM and Bannaby are associates and have contravened the substantial shareholding provisions and the takeover code, by acquiring a relevant interest in more than 20 per cent of the company without first making a takeover offer.
The move to negate the voting power of Kerridge and McGrouther is interesting as Datadot also said yesterday that a shareholder with more than 5 per cent had lodged a requisition requiring the company to call a shareholder's meeting to vote on the removal of directors Michael George and Connie Lo Sin Sye.
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