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Twist in ARMs' turnaround

An Asia Resource Minerals shareholder has mounted a last-ditch effort to scupper the miner's recapitalisation plan
April 15, 2015

A hedge fund and a wealthy benefactor could soon mount a last-ditch attempt to scupper the proposed recapitalisation of debt-laden Asia Resource Minerals (ARMS). Hong Kong-based Argyle Street Management and Indonesian business group Sinarmas are considering an alternative refinancing and restructuring plan, intended to prevent ARMS shareholder NR Holdings from seizing control of the Indonesia-focused coal miner.

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NR Holdings - backed by major shareholder Nathaniel Rothschild - agreed to underwrite ARMS' recent open offer to the tune of $100m (£67.8m). But shareholder Argyle claims NR plans to snatch control of ARMS, robbing investors of a takeover premium. Indeed, the open offer shares were priced at roughly double the market price, discouraging other shareholders from participating. Moreover, the open offer entitlements can't be traded, and only underwriter NR can exceed its entitlement.

Argyle's potential offer of 41p a share values ARMS at £99m and represents a huge 173 per cent premium to the share price just prior to the news. If the original refinancing plan fails, Argyle intends to underwrite a $150m fundraising at 28p a share, and compensate shareholders who opt out with cash. It plans to use the net proceeds to pay down ARMS' debt, finance restructuring and provide working capital. It also wants to give control of the main Berau mine to Sinarmas; it claims a local operator could more effectively engage with local stakeholders, head off union disruption and curry favour with the Indonesian government.

Argyle is urging shareholders to veto the original refinancing plan, but ARMS' board says Argyle is yet to approach it. Argyle may proceed even if the board declines to negotiate.