mmk issued notice of termination of scheme , page-22

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http://www.smh.com.au/business/flinders-russian-takeover-hopes-fade-20120703-21ed8.html

Flinders' Russian takeover hopes fade


July 3, 2012 - 1:52PM Read later
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Shares in Flinders Mines sank after a proposed takeover offer by a Russian steel maker fell through following legal action from a shareholder.

Flinders said Magnitogorsk Iron & Steel Works OJSC (MMK) had terminated its scheme implementation agreement (SIA) in relation to the $554 million proposed takeover.

Shares in Flinders were 1 cent, or more than 7 per cent, lower at 12.5 cents in recent trade.

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Magnitogorsk confirmed it will walk away from the takeover bid it launched in November, ending a curious and murky affair that unravelled in Russian courts over recent months.

An obscure Russian woman - Magnitogorsk shareholder Elena Egorova - has successfully brought down the deal after applying for an injunction to the takeover in April.

Ms Egorova’s injunction was based on the argument the merger would lead to financial and operational risks for Magnitogorsk, and therefore her shareholdings in the company - despite the fact she owned less than 0.001 per cent of it.

She then won successive delays to the court hearing to push the merger past its June 30 deadline, at which time Flinders was no longer bound by exclusivity.

The hearing was finally due today in Russia, but Ms Egorova won another 30-day delay, prompting Magnitogorsk to officially abandon the bid.

“Although MMK expects it will ultimately be successful in resisting the claim, the hearing has been adjourned and the injunction relief will under Russian law continue for at least another 30 days after the court’s decision … In all the circumstances, MMK has decided that the company should terminate,” the company said this morning in a statement.

Motives

There are varying theories among local investors about Ms Egorova’s motives in the affair.

Magnitogorsk’s cash flow and debt situation has been called into question by reports earlier this year, and some investors have wondered about the company’s ability to find finance for the Flinders takeover.

Magnitogorsk's rate of steel production has also been a point of conjecture, with the company and the Russian government reportedly publishing different production figures earlier this year.

Magnitogorsk gave no indication in today’s statement that it intended to revive its bid for Flinders.

Flinders has projects in the Hamersley Ranges, 70km northwest of Tom Price in the Pilbara region of Western Australia, and in the emerging Mid West iron ore province of WA.

AAP with Peter Ker, BusinessDay



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