fin review article, page-3

See below from AFR:


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D-Day for Flinders
Courtroom D-Day in Siberian Chelyabinsk came and went for Flinders Mines with absolutely no improvement in the consistently gloomy outcomes of its legal push to complete a takeover by Russian steelmaker Magnitogorsk.

Late on June 6, the three judges of Court no. 18 of the Chelyabinsk Arbitrazh Court refused an application by Flinders Mines to lift an injunction that prevents Magnitogorsk closing its $544?million takeover. The court separately refused an application by Magnitogorsk to lift the injunction enforced since April 6 in the name of a mysteriously elusive small shareholder of the Russian company called Elena Egorova. Through the twists and turns of the past three months, Flinders and Magnitogorsk have settled on June 30 as the drop-dead date for the completion of this ill-fated deal. Given a hearing of the merits of the Egorova case is not due to start until July 2, this latest defeat would seem to close the book on the takeover, barring any further agreed indulgence by the companies. The betting is that is not going to happen.

There is a consensus stretching from Moscow to Adelaide that says this whole ludicrous legal affair has been manufactured to relieve Magnitogorsk of any requirement to complete a deal that it either can’t afford or has been warned off from by its political betters.

Long-time Moscow-based blogger John Helmer writes that no one has been able to find Egorova over the three months since legal action aimed at protecting her interests was launched in April. Many Flinders owners hold that Egorova is a legal figment of someone’s imagination.

Flinders Mines is now largely a possession of global hedge funds and none of them are impressed by the collapse of a deal that was within 24 hours of completion when this phantom shareholder went to court to protect the value of a $50,000 investment in Magnitogorsk.

Whatever the shady, Cyrillic uncertainties of Russian justice, the question before the Flinders Mines management and board is what they do now. Flinders Mines went into a trading halt on Wednesday in preparation for news from Chelyabinsk. And there it remains as of the close of business on Thursday.

Given this bid is timed out by Russian justice, Flinders Mines loses a suitor without even earning the $2.5 million kill fee that would have been triggered by walking away.

But surely this cannot be left to end without Flinders Mines attempting to defend the immediate interests of its own shareholders and the broader integrity of the market.

Magnitogorsk won what was effectively a Dutch auction for Flinders Mines with a bid late last year of 30¢ a share for the emerging iron ore producer. We understand that competing interest petered out at near 25¢ a pop. And, for all Flinders Mines might argue that its prospects have improved since then, the travails of global markets would suggest matching the Russian offer would be a sizeable task.

Which says to me that the next stop for boss Gary Sutherland should be the Takeovers Panel, which should be asked to force Magnitogorsk to complete the deal.

Sutherland should then deliver himself serious leverage by proceeding to the courts in an attempt to freeze Magnitogorsk’s 5 per cent stake in Fortescue, which is worth around $700 million.
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