What's new
■ Founders pondering a bid
■ Copper price has tanked
■ Chairman has resigned
Controversial Kazakh copper miner Eurasian Natural Resources Corporation (ENRC) is again undergoing tumultuous change. ENRC's three founders - together, they own roughly 44 per cent of the company, along with the Kazakh government, which owns 12 per cent - have announced they are "in the preliminary stages of forming a consortium to assess a potential offer for the company".
The opportunistic move comes after the price of copper sank to a two-year low in April amidst a wider sell-off in commodities, sparked by renewed fears that China's economic growth will be slower than anticipated.
Speculators are betting that the parties will come through with a bid to take the company private for at least the 18 per cent free float - but potentially also for Kazakhmys' (KAZ) 26 per cent stake. The shares climbed to 291p immediately following the announcement, up from a near-five-year low of 202p earlier in the month. Moreover, the company's independent chairman, Mehmet Dalman, recently resigned over governance issues - along with at least six other directors and executives. So there are good reasons to think a bid will materialise. The UK Takeover Panel has imposed a deadline of 17 May for a formal bid to be made.
JPMorgan Cazenove says...
Hold. Ultimately, assessing the likely success or failure of a bid requires an insight into the founders' personal financial positions - a near impossible task. The broader question of the Kazakh government's intentions - to create a 'national champion' - is relevant, but also impossible to discern at this stage. We assume that the price paid would be somewhere around 300p a share, representing a 30 per cent premium to closing share price prior to the announcement. Expect EPS of 49¢ for 2013.
Macquarie says...
Sell. Minority shareholders are essentially powerless to stop a delisting should the founders wish to pursue that, and investors should jump ship while it's still possible. A vote to remove the shares from the London market would only require a 75 per cent majority - which, in turn, would only require the support of 7 per cent of the minority shareholders and would leave retail investors holding an illiquid stock in an unlisted business. Alternatively, the bid could simply be an opportunistic attempt to support the weak share price.
