Understanding "Rich Mark + Accent Resources" shareholding ownership and association :
Hi guys,
As you may notice on recent MZI presentations, it is intriguing that the MZI shareholding ownership figure of both "Rich Mark Development Group" and "Accent Resources" funds is being reported as a single total number : 13.19% instead of two figures (8.93% and 4.20% respectively), despite both funds being separate entities. So what is the story here ?
I have a speculative explanation/theory, I think the answer could be found on the Q4 2017 activities report (Page2 under corporate section), highlights are mine :
Quote :
"Total issued capital at 31 December 2017 was 230,552,731 ordinary shares with a further 3,800,000 unlisted options with varying exercise prices and maturity dates. Subsequent to the end of the period in January 2018, 7,412,843 shares were issued to RCF in lieu of interest payments, increasing RCF’s shareholding in MZI to approximately 50.23%.
In early December 2017, shareholder Rich Mark Development (Group) Pty Ltd (Rich Mark) advised it had increased its shareholding in MZI to approximately 8.6% from 7.4%. After the end of the quarter, Rich Mark announced a further increase in their holding to 8.93%. Shortly thereafter Rich Mark, together with 4.2% shareholder Accent Resources NL, reported their association (inclusive of Mr Jie You, a director of bothRich Mark and Accent who personally holds 0.06% of MZI) resulting in an overall associated interest of 13.19%."
End of quote
Then came the 08 march 2018 ASX announcement of appointment of a new Director representing the interests of both Rich Mark and Accent resources on the MZI Board of Directors :
Quote : "MZI Resources Ltd (ASX: MZI) is pleased to announce the appointment of Mr. Yuzi (Albert) Zhou as a Non- Executive Director of the Company.
Mr. Zhou is the Executive Chairman of ASX-listed Accent Resources NL (Accent), which has been a shareholder of MZI since November 2015. Together with Melbourne-based Rich Mark Development (Group) Pty Ltd, Accent holds a total associated interest in MZI of 13.19%."
End of Quote.
IMO in order to deal with the (serious, see annex below) risk of an aggressive takeover of the company by RCF (the majority shareholder with now more than the threshold 50% ownership and voting power), both "Rich Mark" and "Accent resources" joined forces by announcing their association and appointing together a Director on MZI board (Mr Zhou chairman of Accent resources) representing and defending their common interests allowing them to be ready to vote down / nip in the bud any future opportunistic attempt by RCF (or other entity) to take over privately MZI at a cheap price before the company completes its turnaround and realizes its full potential.
It should be noted that in such a case of an aggressive premature takeover of MZI by RCF, the big loosers would be us small shareholders who would be compensated in cash at a low stock price not reflecting true potential value of the company. Just imagine they buy and take privately the company at a 50M$ market cap despite the high probability potential of MZI post upgrade of the plant to become a cash cow 40M$ profits per year machine and achieving a 500M$ market cap ?).
I think we got lucky that 1/ Rich Mark + Accent Resources decided to act together and 2/ RCF acccepted the financial restructuring and continues to supporting financially the company. A win-win situation for both Rich Mark, Accent resources, for RCF and for the remaining small shareholders. MZI is a turnover story, let it realize its full potential of a 20 bagger ! Good luck to all !
Annex (for further reading) :
In order to get an idea of how much serious the risk of MZI takeover by RCF really was especially in the context of MZI debt restructuring and negotiations (which luckily ended well) with RCF (who owns now 41M$ MZI debt, see the RCF funding package ASX announcement of 29 march 2018), one should read the story of "Ausenco Limited" (AAX) a company that has been taken over privately by RCF in an eerily similar "turnaround/recovery + debt restructuring negotiations" circumstances, I would say we got extremely lucky !
(Even worse, "Ausenco" small shareholders werent allowed to keep their AAX shares in the form of new RCF shares and benefit from upside potential, only big shareholders and Ausenco management were allowed to keep their shares in the private company RCF !!! Small shareholders were obliged to sell their shares to RCF !!!) Yes we got extremely lucky !
Quote : "The board of Brisbane-based engineering, procurement and project management company Ausenco on Tuesday recommended a takeover offer from private equity firm Resource Capital Fund VI (RCF VI), which valued the company at A$153.7-million.
Ausenco had formed an independent board committee (IBC) in May to consider RCF VI’s proposal to privatise the company by way of a scheme of arrangement. The private equity firm offered shareholders A$0.40 a share.
“The proposal is at a significant premium to market value and on terms which, given the circumstances that we face with the near-term maturity of our secured debt, we believe reflect fair value,” said Ausenco chairperson, George Lloyd, who is also the chairperson of the IBC.
The offer represented an 18% premium to the closing price of A$0.34 a share on June 13 and a 67% premium to the undisturbed three-month volume weighted average price of A$0.239 a share.
“Ausenco operates in a dynamic and challenging market, which would present ongoing uncertainties and risks to the company if it were to continue independent operation. In that context, the IBC believes that shareholder value will be maximised and Ausenco will be best positioned to succeed in the future through the proposed transaction,” Lloyd said.
Commenting on the proposed scheme, RCF Management and the investment adviser to RCF VI, Peter Nicholson, said that RCF VI believed the proposal provided Ausencoshareholders with certainty in a “volatile and challenging market” for miningservices businesses.
If the scheme was approved at a shareholder meeting, scheduled for late August, RCF VI had confirmed that it would convert its A$61-million secured debt facility into 97-million shares in Ausenco. RCF VI might also elect to convert all, or part of, its working capital facility into Ausenco shares at the same price as the offer."
End of quote
"A BRISBANE-based resource company is facing a takeover by private equity at a share price that is far cry from the heights reached during the mining boom."
"EXECUTIVES at struggling resources engineer Ausenco will get millions of dollars in potential bonus shares awarded in a takeover, even though that runs counter to some investor guidelines."
End of Quotes.
Finally, here is some quotes/reactions/comments from some hotcopper forumers affected by "Ausenco" takeover by RCF :
Quotes : "Weak as p*ss Zimi. You keep all your shares and all the poor old Joe Plodds lose half their money. 40 cents is a joke. Don't vote for this rubbish."
"Yep disappointing, but not surprised. They've got all the big holders onside and they control the purse strings."
"Harsh for the small players. lots of losses for many. That's life in the markets though."
"Agreed! What a disgrace! And some of the big shareholders get to keep their shareholdings, while we plebs will be forced to leave if the scheme is approved? There should be laws against this type of robbery: either agree to the scheme and get your 40c per share, or vote against the scheme and keep your shares. How can the large shareholders be allowed to have it both ways; they get to keep their shareholding no matter which way the vote goes. Disgusted! I'm voting NO of course."
End of Quotes.
Hope that helped !
Happy multi-bagger hunting and investing to all !
MZI Price at posting:
12.5¢ Sentiment: Buy Disclosure: Held
