Shareholders in Afferro Mining (AFF) voted overwhelmingly in favour of the company being acquired by International Mining and Infrastructure (IMIC) in a special meeting this week. With all the other suitors having pulled out of talks to buy Afferro earlier this year, there were few options left for shareholders other to accept.
Readers who acted on our buy tip advice in January at 82p will be sitting on modest paper profits of 4 per cent, as the shares currently trade for 85p ahead of the deal's completion next month. IMIC will pay 80p in cash for each Afferro share, plus issue a two-year, Irish-listed convertible loan note with a principal value of 40p. The convertible loan notes carry a coupon of 8 per cent, which will be rolled up and paid at the end of the 24-month term. Upon maturity, the notes together with accrued interest will be paid in either cash or convert to the equivalent value in IMIC shares at the time of conversion, at IMIC's discretion.
Afferro's current share price reflects mainly the share component of the offer with little value being assigned to the convertible element. This is due to scepticism surrounding IMIC and its ability to secure funding to develop Afferro's large iron ore projects in Cameroon, as IMIC has already issued tens of millions of dollars worth of convertible bonds and has no near-term cash flows.
