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Kazakh mining giant ENRC takes step closer to evading market scrutiny Kazakh mining giant ENRC takes step closer to evading market scrutiny
(3 months later)
One of the London Stock Exchange's most controversial companies took a major step towards retreating from the scrutiny of the public markets on Monday when the largest shareholder in Eurasian Natural Resources Corporation (ENRC) backed a £3bn swoop by the mining group's founders to take the business private.One of the London Stock Exchange's most controversial companies took a major step towards retreating from the scrutiny of the public markets on Monday when the largest shareholder in Eurasian Natural Resources Corporation (ENRC) backed a £3bn swoop by the mining group's founders to take the business private.
Kazakhmys, like ENRC, is a natural resources company which has emerged from Kazakhstan. It said it would vote its 26% stake in the company in favour of the bid despite previously insisting it was working on securing a higher price. While Kazakhmys still argues the bid undervalues ENRC, it now concedes it sees "no prospect of obtaining improved terms".Kazakhmys, like ENRC, is a natural resources company which has emerged from Kazakhstan. It said it would vote its 26% stake in the company in favour of the bid despite previously insisting it was working on securing a higher price. While Kazakhmys still argues the bid undervalues ENRC, it now concedes it sees "no prospect of obtaining improved terms".
A consortium which includes ENRC's three billionaire founders – Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev – along with the Kazakh government is attempting to acquire the 46% of ENRC it does not already own after the group's share price dropped dramatically over the past two years because of a string of corporate governance rows and scandals that have seen the company investigated by the Serious Fraud Office as well as the UK Listing Authority.A consortium which includes ENRC's three billionaire founders – Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev – along with the Kazakh government is attempting to acquire the 46% of ENRC it does not already own after the group's share price dropped dramatically over the past two years because of a string of corporate governance rows and scandals that have seen the company investigated by the Serious Fraud Office as well as the UK Listing Authority.
Observers believe that the Kazakh government has been particularly keen that a deal to take ENRC private is agreed because it fears the reams of bad publicity about the company's alleged conduct is damaging to Kazakh business in general, as well as to ENRC in particular: the company remains a huge employer in the country.Observers believe that the Kazakh government has been particularly keen that a deal to take ENRC private is agreed because it fears the reams of bad publicity about the company's alleged conduct is damaging to Kazakh business in general, as well as to ENRC in particular: the company remains a huge employer in the country.
Two of Kazakhmys's largest shareholders, former chairman Vladimir Kim and chief executive Oleg Novachuk, have given their backing to their own board's approval of the ENRC bid. Kim, who still sits on the Kazakhmys board and is widely assumed to be a loyal servant of the Kazakhstan government, was heavily involved in the discussions. A source close to Kazakhmys, which is also 26% owned by the Kazakh government, said that officials in Astana had also been in "active discussions" with the Kazakhmys board about the deal.Two of Kazakhmys's largest shareholders, former chairman Vladimir Kim and chief executive Oleg Novachuk, have given their backing to their own board's approval of the ENRC bid. Kim, who still sits on the Kazakhmys board and is widely assumed to be a loyal servant of the Kazakhstan government, was heavily involved in the discussions. A source close to Kazakhmys, which is also 26% owned by the Kazakh government, said that officials in Astana had also been in "active discussions" with the Kazakhmys board about the deal.
ENRC's independent directors said they were unable to recommend a bid that left them "very disappointed" and "materially undervalues ENRC, its fundamentals, the intrinsic value of its underlying assets and its growth prospects".However, they are unlikely to have any say in the company's fate as the Kazakhmys backing now means the consortium has about 80% of the votes.ENRC's independent directors said they were unable to recommend a bid that left them "very disappointed" and "materially undervalues ENRC, its fundamentals, the intrinsic value of its underlying assets and its growth prospects".However, they are unlikely to have any say in the company's fate as the Kazakhmys backing now means the consortium has about 80% of the votes.
The only possible source of a delay to the deal now appears to be Kazakhmys's independent shareholders, who account for about 36% of its shares. They will need to approve a waiver for Kim, Novachuk and a smaller shareholder, Eduard Ogay, whose resultant increased holdings in Kazakhmys after any takeover is completed would normally trigger them launching a mandatory buyout of Kazakhmys.The only possible source of a delay to the deal now appears to be Kazakhmys's independent shareholders, who account for about 36% of its shares. They will need to approve a waiver for Kim, Novachuk and a smaller shareholder, Eduard Ogay, whose resultant increased holdings in Kazakhmys after any takeover is completed would normally trigger them launching a mandatory buyout of Kazakhmys.
The ENRC suitors – now renamed Eurasian Resources – are offering ENRC shareholders cash plus the Kazakh government's stake in Kazakhmys as payment for ENRC shares. The offer was unchanged in structure from a proposal sketched out in May, although the bid is now worth slightly less because of a sharp drop in Kazakhmys shares. On Monday, they shed 13.25% on the news to 233.7p. ENRC shares edged down 1.43% to 213.8p.The ENRC suitors – now renamed Eurasian Resources – are offering ENRC shareholders cash plus the Kazakh government's stake in Kazakhmys as payment for ENRC shares. The offer was unchanged in structure from a proposal sketched out in May, although the bid is now worth slightly less because of a sharp drop in Kazakhmys shares. On Monday, they shed 13.25% on the news to 233.7p. ENRC shares edged down 1.43% to 213.8p.
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