ENRC founders submit lower bid for their Kazakhstan mining company

Billionaires reduce offer already rejected by troubled company's independent directors as 'undervaluing' the business

The three billionaire founders of controversial Kazakh mining company Eurasian Natural Resources Corporation are poised to unveil a final but reduced £3bn bid before a deadline on Monday.

The oligarchs, Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev, made a tentative proposal in May worth around £3.3bn, which was rejected by ENRC's independent directors.

The offer involved a mixture of cash plus shares from the Kazakh government's stake in rival London-listed mining group Kazakhmys. Under the new proposal, the structure remains the same but the total price is lower following a fall in Kazakhmys shares since May. To complicate matters further, Kazakhmys itself holds a 26% stake in ENRC.

In a statement on Sunday the oligarchs said: "In response to the recent press speculation, the consortium confirms that it is in the advanced stages of preparation of a possible offer to be made for the entire issued and to be issued share capital of ENRC. It is a pre-condition that Kazakhmys delivers an irrevocable undertaking to accept the offer (subject to Kazakhmys shareholder approval) in respect of [its stake in ENRC."

Ferroalloys at an ENRC site in Kazakhstan. The company, troubled by corruption allegations, is the subject of a reduced bid by its founders.The consortium is offering 172.3p in cash plus 0.23 Kazakhmys shares. Based on Friday's price of 269.4p for Kazakhmys shares, it values each ENRC share at around 234.3p compared to its latest market price of 216.9p.

But the original proposal was worth 260p for every ENRC share, which ENRC's independent directors had already rejected as "materially undervaluing" the business.

However, there is little they can do if Kazakhmys decides to put its 26% shareholding behind the bidders, which it is reportedly minded to do. Between them, the oligarchs and the Kazakh government already own 53.9% so any deal with Kazakhmys would see the offer go unconditional.

The ENRC founders decided to take the company private amid investigations by the Serious Fraud Office over fraud, bribery and corruption allegations, boardroom rows and an acquisition spree which left it with around $5bn (£3.24bn) of debt.

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Article Source : http://www.guardian.co.uk