today's australian, Congratulations to all minority holders, keep holding hard
Brockman minority shareholders resist Wah Nam's mop-up BY: BRYAN FRITH From: The Australian April 13, 2012 12:00AM Increase Text Size Decrease Text Size Print
HONG Kong-based Wah Nam International continues to make heavy weather of mopping up the minority shareholders in iron ore hopeful Brockman Resources.
Wah Nam secured 55.3 per cent majority ownership and control of Brockman last year with a controversial hostile scrip offer that was opposed by the Brockman directors.
Wah Nam started with 22.6 per cent of Brockman, but the board believed from the outset that a wide spread of Asian investors had bought shares ahead of the bid and warehoused them for Wah Nam, in the process bypassing the takeover and disclosure requirements of the Corporations Act.
Brockman went to the Takeovers Panel but was unable to provide sufficient hard evidence to persuade the panel to make a declaration of unacceptable circumstance.
Wah Nam also made a concurrent, but not inter-dependent, bid for FerrAus, but was foiled when that company merged with Atlas Iron.
In December, Wah Nam launched a mop-up offer for Brockman of $1.50 cash and 18 Wah Nam shares for each Brockman share, subject to a minimum acceptance of 80 per cent, which, based on Wah Nam's then-share price of 8.5c, valued Brockman shares at $3.03 -- a premium of 34 per cent to their previous closing price of $2.26.
This time around, the independent directors of Brockman recommended acceptance and said they would accept for the 11.35 per cent they controlled, subject to satisfaction of certain conditions.
The independents accepted in early February, taking Wah Nam's stake to 71.5 per cent. But it has since struggled to make further progress.
On February 10, the offer was extended until March 19. On March 9, Wah Nam waived the 80 per cent minimum acceptance condition and extended the offer by another month to April 23. Days later, the remaining conditions were waived, making the offer unconditional, which ensured that accepting holders would receive the bid consideration.
At that stage Wah Nam had crept up to 73.11 per cent and expressed confidence that it would achieve more than 80 per cent of Brockman.
The offer has now been open for more than three months and Wah Nam, as at April 4, had only edged up to 78.11 per cent, still below the initial 80 per cent minimum sought. Now that the offer is unconditional, Wah Nam has until April 23 to decide whether to further extend or allow the offer to close.
Wah Nam would no doubt prefer to obtain at least 90 per cent of Brockman to enable it to compulsorily acquire the remaining holdings and secure 100 per cent ownership.
But it appears unlikely that will happen. There is a solid core of --mainly Australian -- retail holders who have faith in Brockman's Marillana iron ore project and who remain unhappy about the way in which Wah Nam secured control of the company last year. They were prepared to remain as minority holders after the first takeover bid and seem likely to maintain that stance this time around.
Wah Nam hasn't been helped by remarks by Brockman directors during the bid. Ross Norgard suggested that Brockman's exploration opportunities could see the company produce up to 40 million tonnes of ore a year, up from its target of 15-25 million tonnes, while Warren Beckwith said Brockman was in talks with Chinese and Japanese steel mills to help fund the $1.9 billion Marillana project.
Brockman responded by declaring it wished to retract the statement that it could produce up to 40 million tonnes compared with targeted production at Marillana of 15-25 million tonnes a year.
Brockman reiterated the statement in the target's statement that the Marillana project could sustain a nominal production rate of 17 million tonnes a year for a mine life of about 20 years, with a peak production in excess of 20mtpa.
Brockman added that since the issue of the target's statement the company had not estimated any additional mineral resources and ores reserves.
Maybe not, but that completely ignores why Norgard made the statement, whether he had any basis for his remark or whether he is simply an unmitigated optimist.
Brockman, of course, is under a statutory obligation to include in the target's statement all material information within its knowledge that is necessary to enable Brockman shareholders to make an informed assessment as to whether or not to accept the Wah Nam offer.
Despite the retraction, Norgard's remarks are likely to fan expectations among those holders who have not accepted the offer that the Marillana project is likely to be upgraded, probably after the offer has closed, and if that's the case, it may provide further encouragement to hang on to their shares.
Moreover, since the offer was announced Wah Nam's share price has fallen to 5.3c, which reduces the value of the offer to $2.45 a Brockman share.
That's below the $2.50 at which Brockman shares are at present selling, which is a disincentive for minority shareholders to accept the offer.
BRM Price at posting:
$2.51 Sentiment: ST Buy Disclosure: Not Held
