The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
i wonder what the SP would have been with no baimskaya asset? defo over £10. Just goes to show how the "independent directors" apparently have no clue on how to judge value. Did they even consider selling Baimskaya to Kim (since he wants it so much) at a loss (lets say $300m) and consider whether that was better value to all shareholders compared the low ball offer? i doubt they even thought of this or if they did, ignored it and made sure that their lawyers and advisors agreed. Shocking.....Even if they do not up the offer, hold onto those shares, vote no, take back control (excuse the reference here) and get rid of the entire board ASAP! I believe given the bad news on Baimskaya, they need a high copper price to deliver it so they know there is value. As a side, i was reading the last update on the Baim infrastructure again (18.11.2020). Noticed that KAZ has agreed to build a 200km stretch of the road and that no decision was taken on who will fund the rest of the road to the port (another circa 200km). How odd, they are building a road to nowhere, which means that any govt with sense would tell them to cough up (some if not all) for the other 200km.... same sort of goes for the other infrastructure. Even if govt builds, no govt in their uncorrupted right mind would then allow free use of these by KAZ when they are potentially the biggest user in this remote region. So expect further cost escalations on either (1) capex should KAZ decide to take over most of this or (2) opex as KAZ will pay for these projects over time, as the only/biggest user........ So given all this, and the project could be profitable at certain cu prices, how did the "independent directors" still consider this to be the best deal for all shareholders.....? Vote no! take back control! then remove the board members ASAP! removing them would be difficult with Kim and co now at just over 50% but voting down this deal makes the independent board's position untenable and they will go......
As a long term holder, I feel slightly more optimistic about holding for the moment. At 8 I might change my view.
Good luck all.
here today guys look at BIG MINERS BOOOOOOOOOOOOOOOOMMMMM
KAZ shareholders being robbed in broad daylight this would be up 15% today
With Cu at current levels , I will be amazed if we don’t get a revised offer, also personally think Cu will continue its rise for some months.
Even at £8 it’s a steal!
ATB Bottled
I am surprised that Kaz is still at 670. There is a very high chance that the offer will be revised to 8 to get to 75% required for delisting. the upside is 170 pence or more downside is 30 pence, I would say the chances of upside are 75% and the downside less than 25%. I am surprised why there are no punters jumping in to encash ..
am I missing something?
takeover looks like shareholders being robbed imo
Happy New Year guys
Please may someone advise me when we'll know when this takeover attempt has failed?
I know one could feel the market already knows that when we're trading 20p higher than the takeover price but I'm not convinced because we're so far off where we'd expect to be (800p+)
happy new year all. I agree even £8 would be a steal so I am sure he will do that than risk losing out on the opportunity or trying anything funny.
I agree with the point that the market overreacted negatively to the purchase of Baimskaya. I think Baimskaya itself has appreciated by £1 billion + given the excellent initial feasibility results and a significant increase in gold and copper prices.
Enough of Kaz, I am off now to celebrating the New Year - it's only a few hours from midnight where I am.
HAPPY NEW YEAR everyone! Hope it brings us all luck in investing and return to freedom from covid. Good luck!
Precisely, Hash! What people fail to realize is that it was the purchase of Baimskaya that created this unusual opportunity to buy an undervalued and underappreciated company at a huge discount to its fundamental value - the first such opportunity for Kim in the company's 15 years of being listed when the market reacted with such immense negativity to what was a long term sound strategic value-accretive move. This reaction established an excellent (and persistent) price arbitrage - the share price was driven lower while the market was moving higher, gold prices moving to record levels later followed by copper prices, while all this time the company kept generating huge amounts of cash, reducing its leverage and adding further value by taking Baimskaya through feasibility study and confirming its massive potential. All this time this price arbitrage was deepening as KAZ massive discount to its fundamental value kept increasing, and the uncertainty around Baimskaya was used by Kim to keep that arbitrage in place by releasing next to no information on Baimskaya - didn't you notice how scarce the news flow was since the acquisition? Whether Kim planned all this from the outset and purchased Baimskaya for this reason, or whether it was just a fluke that reaction to this acquisition was unexpectedly bad (and I tend to think it was luck rather than planned), it was too good an opportunity to miss, so no wonder he came out with the offer. The only reason he didn't launch the takeover early in the year when his luck struck again when share price was driven even lower by coronavirus pandemic is that he either was not quite ready with the financing, or VTB got scared and put it on hold. I'm sure of that - otherwise he would have done it, no doubt.
What they (Kim and Novachuk) don't quite understand is that it's not just a handful of retail investors like myself who understand the above, but the whole market does, comprising professional institutional investors, RWC being a prime example. They were quick to come out and call this rubbish offer for what it is, politely saying "we are DEEPLY UNDERWHELMED by the offer". And since that statement copper price moved up by almost $1000 per tonne!
KAZ is trading above the offer price and that says it all - the market is saying NO to the offer, and it's just a matter of time before Kim sends out invitations to shareholders to sell their shares to him and will hear silence in response. They'd have to raise the offer price or face humiliating defeat and miss this great, and rare, opportunity to buy the company - because they are greedy.
meant $2 B to $1 B
agree. Shakhtar
Rastuss,
moreover, if I am a majority shareholder then I do want to buy others out at the lowest possible price but not by taking a poison pill and putting my existing money at risk.
for example, he can persuade/force the management to make another stupid decision which may bring down the share price. but will he do that if it risks his own money just because he wants to buy out others cheaply? the logic isn't great.
one question why didn't you buy kaz at @250p? probably the same reason he may also not have put an offer even if he could.
if I see my value in kaz going down from £2 to £1 and it's a falling market with no certainty then would I want to really invest more? I am poorer and given the uncertainty do I want to take more risks? and as I am poorer do the lenders want to lend me more money?
Rastuss: no offence, but I just laugh every time I read your thoughts on how Kim can just waltz in and put another offer at a cheaper price sometime in the future. And when I said he wants dividends - absolutely! As anyone investing in a company wants a return. Think about it - we are just short term or long term investors, and we want dividends. Kim is a PERMANENT investor, and has been for over 20 years now - I have no doubt he is hungry for some cash back. He is rich, yes, and he can decide to delay receiving cash return from his investment, but for how long, do you think? He has been delaying for too long? Yes, if he succeeds in taking it private, the company will not be paying dividends, but it would be much easier for him to extract $50m or so every year without lending banks noticing, so that would be his dividend. What I was saying in my previous post is that, IF THE COMPANY STAYS LISTED, it will continue paying dividends, because it would be nearly impossible for Kim to get cash out from the company for himself through some dodgy schemes - it's too risky nowadays, simpler to just continue paying a small dividend, as they did these last couple years.
And Kim cannot continue suppressing the company value (as he did since buying Baimskaya, obviously planning this takeover and preparing for it for the last two years) for much longer. Baimskaya can't wait, they've been delaying feasibility study results, but they have to move on, Russian government will be pushing them to. They need financing, and again, partners and lenders will be looking for evidence of strong future cashflows, not balance sheet, as you suggest. If they were looking at balance sheet, believe me, no bank would give the company any money - it is FULLY geared. Which is why they are talking about project financing for Baimskaya, as this type of financing does not rely on the existing balance sheet but looks at what asset value and cash flows the project itself would generate over the lending period. If Kim does not succeed with the takeover within next 3-6 months, he would be forced to start heavily marketing how great Baimskaya is. We'd suddenly learn many things we don't know about this project - huge resources, all infrastructure negotiations suddenly concluding positively for the company. All this will be done to drive up the perceived value of Baimskaya to attract lending banks. And if banks don't fund it fully, then it would be even more important to sing the best possible song for Baimskaya to sell a stake to some Chinese or Russia partners for its maximum value. Kim's interests will align with ours IF HE FAILS to take KAZ private - that was my point. This is why I am holding my shares and would not sell until Kim puts up a proper offer. Because when he fails, there is only one way for KAZ share price - and that is up up up and up. All IMHO and DYOR, as usual.
Rastuss, you obviously have no idea what it takes to raise money for a takeover offer if you think Kim can do it at whim, whenever he wants. I happen to know how this works as I work in an investment bank. You constantly express surprise of him not tabling the offer in March, but that should tell you something - he just couldn't! As I said in my previous post, it takes many months to put together financing as banks do their numbers, then due diligence, then various contracts are negotiated for months. And when a sharp corrections happens, like it did when Corona came to prominence, banks just run for the hills, they put a freeze on any lending. And in normal times, if share price falls because, for example, copper price dives, banks do their numbers on even lower copper prices, to understand how much it would be safe to lend, and then their numbers don't add up, so they don't lend. Whether you are Joe Bloggs or Kim, Abramovich or even God, you can't just walk into a bank and get a massive loan, however corrupt you or the bank management are - the process is still quite rigorous and time consuming. Kim might have some sway in Kazakhstan, but Kazakh banks simply do not have enough money to support a multi-billion takeover (by "don't have enough money" I mean lending limits, regulations etc etc - no point to get technical here but believe me, they cannot do it). Why do you think Kim has not put a takeover offer before? In 2014, for example, or 2015 or 2016? The company was cheap as chips. Surely that was the best time to get it off the market and later benefit from completion and launch of Bozshakol and Aktogay. The answer is simple, no bank would give him money for a takeover then, not even a Kazakh bank as the company's was barely solvent, they only managed to pull through with the help of copper price reversing trend and starting up the new mines on time. The banks are not looking at balance sheet - you are dead wrong there. They are looking at future cash flows. Just like if you try to get a mortgage the bank would be looking at your regular income in the future less your payment commitments. KAZ has net debt of $2.7bn, and if you know anything about debt financing, you'd know that normally on change of control existing debts become repayable at once. Add to that $3bn needed to buy out shareholders and you need almost $6bn to put together a takeover offer. And that doesn't take into account the plans to spend $8bn on Baimskaya - not committed yet, but banks do take it into consideration when looking at future cash flows. And this makes putting together financing for a takeover a huge, immensely challenging task.
Libero: you are a bit too high on your numbers. I think for 2020 KAZ will report revenue of $2.3-2.4bn, Ebitda in $1.35-1.4bn range and net profit in the $600-700m range. If current prices continue for much of next year, 2021 revenue would rise to $2.9-3.0bn, Ebitda to $1.8bn and net profit to $1bn! You can make your own opinion as to what share price that should translate into. I estimate the underlying fair value of KAZ assets, net of debt, at 950-1000p per share. I will not be selling my shares to Mr.Kim unless he offers at least 800p or achieves a 75% shareholding. In my opinion he would fail in his takeover attempt and we will see 1000p share price well before this time next year. No advice intended, DYOR
Rastuss, you misunderstood what I said. I was not suggesting Mr.Kim is buying KAZ for dividends, nor was I suggesting he was going to pay a higher price to shareholders. And you seem to think it’s very easy for Kim to manipulate share price and then get the money to put forward an offer whenever he wants or opportunity presents. I beg to differ. When share price collapses (or is driven down), it is usually for a reason, and the same reason scares banks away from supporting a takeover bid. Not to mention it takes time to put together financing package for a takeover attempt - 6 months at least, more likely a year - and if you don’t succeed you need to start over. And then there is takeover code which prevents bidders from making frequent repetitive bids. I really do think this is his one and only chance, and he must get to 75% to succeed, ie to delist KAZ, and then 90% to squeeze out minorities. That is far from easy in the current market. I do believe he will fail unless he comes out with a much improved offer before the Feb 4th deadline. Absent the offer, KAZ would be trading at 840-850p today, no doubt, and the fact that share price has been consistently above the offer price for much of the time since the offer was announced tells me that the market agrees with me. Mr.Kim needs to increase his bid to at least 800p to get current shareholders to sell to him. Will he do it? I doubt it very much. Hence my belief that this takeover attempt will fail. And once it does, share price will shoot up to 800p or higher, as long as copper price stays above $3.5/lb. Not accepting the offer is a no brainer (DYOR of course) unless and until they announce that they have received acceptances and irrevocables giving them 75%. I believe that’s not going to happen.
According to my back of (probably inaccurate) calculations, it looks to me as though revenues will increase this year to something like $2.75bn vs $2.26bn last year; and profits will rise to something like $860m vs $570m (about 50% up).
All of which leads me to think this could rise to 800-100p if the delisting threat were to disappear.
Does this match up with other people's calculations, or have I made a mistake?
And, as a separate question, am I being naive to think this will re-rate in a normal way given how the market will not forget this hostile takeover attempt?
Will have a ponder on this myself but would be good to hear others views
Also it's curious to see that RWC (who have already come out as being anti-takover) have increased their stake in the company as well, with a recent purchase at 655p.
BlackRock have bought almost £75,000 of KAZ shares @ 655p ish as well.
All of which suggests that they're betting on the takeover failing and the share price rising high thereafter ...
Thanks for the responses - that's much appreciated. 75% is the important figure to focus on then.
Or actually, according to that FT article, it would only take 12% of shareholders to reject the takeover for it not to go through.
"Because of the deal’s current structure, traders reckon it would only take a small group of minority shareholders with a collective holding of about 12 per cent to scupper the buyout — assuming a 75 per cent turnout at a special meeting scheduled for December."
It's also clear from the article that two large shareholders with a combined 6.9% of the shares will reject the deal. You therefore only need 5.1% of the remaining 43.1% to vote against the deal and it will not come to pass!
Or to put it another way, do you think at least 1 in 8 of the remaining shareholders will vote against the deal? When Copper commodity prices have risen considerably, and therefore KAZ's profits will have risen significantly, and shareholders are able to sell for higher than the offer price of 640p already, I cannot see this de-listing.
The question then becomes: What happens next?
Rastuss - you clearly have a v negative experience of the BOD but the idea of them working against their own interests doesn't make sense to me. If the delisting doesn't occur, they will still want to make as much money as possible. I cannot see why they would deliberately sabotage their own investment. Especially when the motivation for delisting was in fact seemingly due to being frustrated at being undervalued for so long, and the share price would rise considerably in the event of the threat of delisting going away !
Furthermore, the Financial Results will be there in black and white, and will read very well given that copper commodity prices are up and will continue to rise. That's something they cannot hide even if they wished to. Unless of course they were to deliberately stop selling copper during the copper commodity boom we're seeing - but there's no sense in that!
So my final questions are:
1) What's the timeframe for this takeover? i.e. when will we know when it has failed
2) What do we expect the share price to rise when it does? (this is something I need to form a view on myself)
All the best,
Libero
The following extract from Morgan Stanley analyst note published on 14 December provides further clarity:
Kaz Minerals has given an update this morning in respect of the current takeover
offer. In this update it notes that the Bidco has now received irrevocable
undertakings to accept, or procure acceptance of the Takeover Offer, in respect
of 10.63% of the share capital. This, combined with the shares owned by parties
involved in the bid, totals 50.02%. This remains well below the 75% threshold
required to take the company private (the stated aim of the bidders). Under
current market conditions, with the shares trading at 650p vs offer price of
640p, it could be challenging to reach the 75% threshold.
Why does this matter? This is relevant as our understanding is that 50% is the
minimum legal threshold for the takeover offer to move forward in acquiring
those committed shares i.e. additional 10.63% of the company (although not the
shares of shareholders that do not accept the terms). Nevertheless, the minimum
threshold in this particular takeover offer has been set at 75%, although it can
technically be reduced down to 50% should the bidders choose to.
What are the other key thresholds? The bidders have stated that the aim is to
take Kaz Minerals private. The threshold for this is 75%. If the bidders can get up
to 90% then this gives the bidder the right to acquire minority shareholdings on a
compulsory basis. We think that if the 75% threshold is breached, the proportion
of committed shares could rise further to the extent that existing shareholders
are not in a position to hold onto shares in an unlisted company.
Rastuss: you haven't quite answered Libero's question, and instead, as usual, you are being overly negative and dramatic in your views. Your comment ignores two facts. One is that, at the end of the day, Kim also needs the value of the company to increase over time and undoubtedly wants dividends, so his interest is aligned to ours, ultimately; and two is that the company operates under a well developed and extensive London Stock Exchange regulations and UK legal framework for corporate governance (anti-bribery laws etc) which makes it VERY difficult to extract value from the company in favour of a set of controlling shareholders to the detriment of others. Possible, but EXTREMELY difficult. That is why Kim&Co want to delist KAZ so that they could eventually move its jurisdiction from London to Kazakhstan or Russia and cease to be subject to English laws. Therefore, the ONLY relevant percentage in their takeover attempt is 75% - anything below means they failed to achieve their objective of taking the company private.
Libero: the answer to your question is contained partly in the Takeover Code (https://www.thetakeoverpanel.org.uk/the-code/download-code) and partly in the stock exchange delisting rules (https://www.handbook.fca.org.uk/handbook/LR/5.pdf) but if you don't want to read, in summary, no takeover can happen unless the acquirer achieves control of at least 50% of shares. However, as I said above, Kim&Co specifically stated in the announcement that their aim is to delist the company, and for that LSE rules say that at least 75% of shareholders need to agree to delist the company.
If they don't achieve 75%, they can still go ahead and complete the purchase of those shares who accepted their offer, because they already achieved 50% through own holding of almost 40% and irrevocable undertakings of 10.5%. The important point however is that by doing so they achieve absolutely nothing! They cannot delist and nothing at all changes from the status quo where they have always controlled, one way or another, the company. From that perspective Rastuss is correct, but if you were a long term shareholder before, and therefore accepted these risks, nothing would change for you. In fact, one could even argue that if they fail to take the company private, they would have to concede defeat and focus on maximising value of the company (including by paying dividends). I hear Rastuss objecting here and saying they would again manipulate the price down and will try to take KAZ private again in a year or so, but this ignores the fact that they need to progress Baimskaya development, and that requires financing, which in turn requires marketing the project and the company to potential investors (both equity partners and debt providers) at their highest NPVs and showing best possible future cashflows.
Hope above gives some clarity. You can also read some commentary in a recent FT article here:
https://www.ft.com/content/077063a2-d86e-4ea3-b79e-62110f1
Really enjoyed the debate about the potential takeover.
My key question is whether 50% is the pivotal number or whether it is actually 75%?
If it's the former, then I'd be inclined to agree with Rastuss.
If it's the latter, then it's a no-brainer.
So can anyone provide proof / a link to help evidence which is most important?
Thank you : )
Rastuss,
They are already claiming to have 50.02% per the Businesswire of 14th Dec. I'd say it's 75% that they want.
Rastuss, I'm no expert but surely Nova wouldn't exercise unless the numbers stack up. We don't know the terms of the 'irrevocable undertakings'. They obviously relate to the takeover offer @640p/sh (or higher) but, one would think, they can't be indefinite.