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  • Elemental Minerals Receives Binding $190M Cash Takeover Offer 0 comments
    Jul 1, 2013 8:23 PM

    Elemental Minerals (ASX: ELM) has received an all cash takeover offer of $0.66 per share from Hong Kong Stock Exchange-listed Dingyi Investment that values the company at about $190 million.

    The off-market offer represents a 126% premium to the volume weighted average price of its shares over the 20 trading days prior to the original offer made on 12 April 2013.

    It is also a 52% premium to the 20 day VWAP to 28 June 2013.

    Elemental noted that the majority of its directors had recommended that shareholders accept Dingyi's offer and that independent expert BDO corporate finance had confirmed the offer was fair and reasonable in the absence of a superior offer.

    Non-executive chairman Sam Middlemas, John Ian Stalker, Michael Barton and Robert Franklyn have all recommended the offer while chief executive officer Iain Macpherson has recommended that shareholders reject the offer on its current terms though he reserves the right to reconsider.

    Stalker and his related entity Fiducs Limited as well as Elemental's largest shareholder Pala Investments have entered into pre-bid purchase agreements with Dingyi over their combined interest of about 13.6% in Elemental.

    In addition, Dingyi has agreed to subscribe for $5 million of Elemental shares at an issue price of $0.3407 each and provide Elemental with additional financing of up to $15 million through a secured convertible loan facility to provide working capital.

    The offer is subject to pre-conditions including a 50.1% acceptance condition and Dingyi's shareholders approving the transaction though its chairman Li Kwong Yuk has already undertaken to vote his 50.3% stake in favour of the deal.

    BDO report

    BDO had valued Elemental's shares at between $0.29 and $0.65 each prior to the offer with a preferred value of $0.47.

    It noted that in absence of a superior offer, this meant that Dingyi's $0.66 per share offer is both fair and reasonable to shareholders.

    BDO said that for shareholders, the cash offer gave certainty in their return on investment and will remove them from any exposure to funding uncertainties.

    It noted that on the downside, they would no longer participate in any potential upside though this was with the caveat that they would face significant dilution or be exposed to significant risks associated with other non-equity funding alternatives.

    Dingyi Group Investment

    Dingyi, which has a market capitalisation of A$90 million, is an investment company with interests based primarily in Hong Kong and mainland China.

    The company is controlled by Chinese entrepreneur Li Kwong Yuk, who also controls a number of other substantial mainland Chinese and international business interests in sectors including infrastructure, real estate, financial institutions and natural resource, among others.

    Analysis

    Dingyi's binding offer of $0.66 cash per share is particularly significant given that it offers a significant premium over Elemental's current and past share prices in a difficult market. The cash offer is also something of a rarity and attractive to Elemental holders.

    It also highlights the value of the company's assets including the Sintoukola Potash Project in the Republic of Congo.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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