The independent committee of Kazakh miner Eurasian Natural Resources Corporation (ENRC) yesterday rejected an indicative $5 billion bid from a group of shareholders led by co-founder Alexander Machkevitch.
Machkevitch, along with other co-founders Alijan Ibragimov and Patokh Chodiev, the Kazakhstan government and state-owned FTSE 100 miner Kazakhmys, who own around 54 per cent of ENRC, had last month said that they were working on taking the London-listed company private.
The UK Takeover Panel has stepped in and given the Machkevitch consortium until 17 May to either announce an intention to bid or pull out, which would then bar them from making another bid for six months.
In a statement released over the weekend, ENRC said that the consortium has made an indicative 175 pence per share in cash, and 0.231 of Kazakhmys share offer, a 7 per cent premium before the consortium last month announced it might table a bid.
At Kazakhmys 17 May closing price of 338.4 pence, the offer stands at just over 253 pence per share - or $2.3 billion for around 46 per cent of ENRC that the consortium do not already hold.
The offer was yesterday rejected by ENRC's seven independent committee on the grounds that it ''materially undervalued'' the company.
The chairman of the independent committee, Dr Mohsen Khalil, said, "We believe the current proposal materially undervalues ENRC, and we will use the extension to seek an improved and formal proposal. The independent committee is committed to serving the best interests of minority shareholders through a professional, transparent and rigorous process, which incorporates the highest standards and principles of independence and integrity."
The Takeover Panel has given the consortium until 3 June to come up with a firm bid.
ENRC has recently emerged from a bruising boardroom battle, which saw deputy chairman Sir Richard Sykes and non-executive director Ken Olisa removed from the board, while Mehmet Dalman, a former banker was appointed chairman in place of Johannes Sittard.
The bitter boardroom battle, plus an aggressive six-year acquisition spree has burdened ENRC with debt of $5 billion, that has led to its stock price fall by 57.5 per cent since its 540 pence-a-share IPO in 2007.
The miner is also facing a January 2014 deadline to exit the FTSE 100 or lift its free float under new stock exchange rules. Its free float is currently is less than 20 per cent, and media had speculated that the company would issue new shares to meet the requirements.
The UK watchdog last month launched a criminal investigation into allegations of fraud, bribery and corruption at ENRC relating to the activities of the company or its subsidiaries in Kazakhstan and Africa.
With annual revenues of $7.7 billion, ENRC is a large diversified natural resources group with its main production assets located in Kazakhstan.
Apart from Kazakhstan, ENRC also operates in China, Russia, Brazil and Africa, including the Democratic Republic of Congo, Zambia, Mozambique and South Africa.
The company's divisions include ferroalloys, iron ore, alumina and aluminum, energy, logistics and other non-ferrous. ENRC controls sizeable proven reserves of minerals including chromium, manganese, iron ore, bauxite coal, copper and cobalt.