Member Info for shakhtar

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.

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

It changes nothing. No news in today's RNS al all. They always controlled the newsflow. If they don't achieve 75%, they will not bother buying a single share, not even from those who have agreed to sell (notably only their Kazakh and Russian friends, who no doubt have been persuaded to sign irrevocables by doing side deals). Everything will stay as it was before, but the newsflow will have to change to a positive one. After all they would likely need an equity partner to finance Baimskaya and to do that they would need to start telling people a positive story about it. This is their last chance to grab the company into private ownership on a cheap, and if this fails, all attention would shift to talking up the value of Baimskaya and driving the share price up with it. And with copper price supporting, investors have nothing to lose and a lot to gain. Hold and vote against the deal - this is the only way to maximize your return on this. And a safe investment in the current market as the floor has been set at 640p and the share price would move substantially higher as soon as this deal fails or Nova will raise the bid in order to get to 75%, and raise it substantially. It's a no brainer, imho.

Rastuss: Getting over 50% does not achieve anything for kim and novachok, or at least not anything that they do not have already. I would venture to speculate they always maintained over 50% controlling position one way or another (and 100% control over the toothless board, as their current offer recommendation has plainly shown). Nova need 75% to take full control and have a shot at delisting the company, and that is not an easy thing to do. The more time that passes since the October announcement, the more difficult it would become for them, and the more likely they would fail in achieving the 75% target. This is because for as long as the share price stays above their offer price of 640p, any shares that change hands at above 640p are passed from those who are happy to sell (who’d otherwise accept the offer) to those who think the price should be higher absent the offer and would certainly reject the current offer. Otherwise why buy now, right? As for Nova, they would not dare to buy a single share now, even through friends or proxy parties, and definitely not above their offer price - this is too risky even for crooks like them.
The formal offer will be made sometime before 4 February, and that is potentially more than three months (!) of shares gradually bought up by those who will be rejecting the offer (as long as price remains above 640p). And as long as the copper rally holds, more shareholders will become convinced that KAZ should be trading in the £8-10 range and would not accept the offer.
I really think Nova would have to increase the offer, otherwise I’m willing to bet, by holding on to my shares, that they would fail.
All imho, no advice intended )

Rastuss, I hear FCA are already investigating

Something is not right here. These delays to the process only confirm one thing, and that is that they certainly rushed the announcement of Nova’s derisory offer without being fully prepared to execute the deal. They obviously saw the rising trend in copper price and wanted to apply the breaks to the share price by announcing the offer early. ANTO aside, other arguably more relevant comparable companies (CAML for Kazakhstan exposure, FQM for similar leverage) are up 50-70% since a month or so ago. KAZ, with its 2x correlation to copper price should be, and would have been, trading in the 760-840p range today, at the very least, if not for this opportunistic attempt to buy the company on the cheap.
It must be so embarrassing now for the so called independent committee! Otherwise they are just shameless liars. They should step up and withdraw their stupid recommendation! I estimate KAZ would finish this year with EBITDA of $1.45bn, and next year at current copper price we are looking at EBITDA being not too far from $2bn! Analysts at Goldman are saying we are entering a new structural commodity bull market, possibly on a similar scale to early 2000s. Just entering! Where is the so-called independent committee, what are they basing their numbers on? What sort of advice are they basing their recommendation on? Liars they are! Taking us for fools.

Price hit a ceiling and there has been no news for a while now. Why so quiet? Kind of reminds me of KAZ just before the take-private offer by the shareholders. Well, this one is definitely ripe for a buy-out offer, with it being a proper cash cow with almost no debt and a ridiculously low valuation. If KAZ shareholders managed to get financing for an overleveraged company, then this one should be easy. I just wonder if Zhevago might have got the same idea. I just hope he is more generous and give us a proper premium this deserves - 300p perhaps?

Are you sure this is not a case of "lost in translation"? They might be confusing the adjournment of the court hearing with the postponement of the deal

Apricotjam, you are making a very good point about different class shares. I just reread their notice of the now adjourned hearing where they make an argument that those Abramovich companies’ shares should be of the same class as everyone else, but you are absolutely right, their rights are restricted by a lock-in so they should be classed as a distinct class from all of us shareholders. I notice KAZ is completely silent in the notice on this point. That looks to me a blatant attempt to pull the wool over the judge’s eyes. Someone needs to bring this to the judge’s attention.
I just wonder if that was the real reason for the adjournment - they must have been challenged on this.
If the court rules that Abramovich shares are a different class, then assuming 80% of shareholders vote at the court meeting (and that is a very high turnout), then we’d only need 11% of all shareholders to vote against for the deal to be rejected. And two shareholders with a combined 7% stake already went public to say the would vote against. I am beginning to think there is a more than decent chance this offer will get rejected. I’m going to buy myself some more shares come Monday!

Rastuss, they would need to acquire 75% to be able to delist the company. However, that is not enough to make the remaining shareholders sell their shares; you need to accumulate 90% to be able to do that.
In theory, yes they could delist with 75% in their hands, but in practice they’d be stupid to do that, as the minorities can then also cause a lot of pain to them. For example, you only need 5% holding to requisition a general meeting in UK. Minorities can become a real and permanent pain in the neck for them. KAZ is a UK company, not Kazakhstani, and minorities are well protected under English law. Nova wouldn’t want to end up in this situation just as much as we don’t, so the best course of action for them is to increase the offer and get to at least 90% before delisting.
Think about it - the reason they didn’t launch a takeover offer to buy at leat 75% but instead chose a much more difficult scheme of arrangement (which needs 75% of all of us to agree) is precisely because they fear getting just over 75% but not enough to push everyone out and then be stuck with a minority and all the associated pain.
IMHO it’s a no brainer, we’ve got nothing to lose by voting the scheme of arrangement down. At the very least there will be a chance to tender shares into a takeover offer, even if they then launch it at the same price of 640p, but I’m sure they’d raise the bid, as they would want to get 90% minimum.
Vote against and good luck everyone!

Sense, if takeover at 640p is rejected, they will no doubt increase the offer price. It does not cost them £3bn, you are forgetting they own 40%, so it only costs them £1.8bn. The went to the bank and got £2.3bn loan to buy everyone out. What does that tell you? They can raise the offer by 27% before they run out of money. And even if shareholders rejected their offer then, the share price will not necessarily drop, it might actually rise as copper price is doing great lately, 3% up today at $3.31/lb - just look at Freeport or First Quantum. I bet if not for this offer (and interestingly time negative news dump by the company to keep the price down), KAZ would have been trading well above 700p now.

Cunningfox, you are both wrong. This is not like the dividend at all. The shares are currently trading with full rights attached, as normal. If you buy them at 638p today, if Nova win the vote and complete the acquisition, you will get 640p sometime next year when the acquisition is done. If you buy shares at 645p, you'd lose 5p, not the whole lot. The reason people buy at above 640p is because they believe the acquisition will be voted down at the court hearing and Nova will have to increase their offer.
And all shares come with voting rights. I suppose they will set the date when you have to be on the register to be able to vote at the court meeting at a later date, when the date of that meeting is set by the court, and when the company sends notices out to shareholders.

If you are planning to vote against (good choice!), it is important to vote at the COURT MEETING. The EGM doesn't matter as much as Nova can vote their shares at the EGM. They cannot vote their shares at the court meeting, hence only need 15% of shareholders at the court meeting to vote against it to shut it down. The date of the court meeting will be set once they have the court hearing which was just postponed, but don't worry, the company will announce the date and should send notices out to all shareholders.

We haven't been told yet.
This is from the announcement:
"It is expected that the Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and KAZ Minerals General Meeting, together with the associated forms of proxy, will be posted to KAZ Minerals Shareholders in due course and that the Court Meeting and the KAZ Minerals General Meeting will be held in December 2020 or early January 2021."

Hash, unfortunately it's very difficult in UK. There were only a handful of such shareholder actions in UK and the first one ever was quite relevant to our situation here. You can read more here:
https://www.cms-lawnow.com/ealerts/2019/11/first-shareholder-class-action-in-england-wales-is-dismissed
... and relevant extract is as follows:
"In respect of the recommendation case, the court found that a reasonably competent director of a bank such as Lloyds could reasonably have concluded that the acquisition of HBOS was beneficial to Lloyds’ shareholders. Notably, the court held that where a director honestly holds the belief that a particular course is in the best interests of the company then a claimant will be required to show that no reasonably competent director could have reached that view. The court also held that directors are entitled to rely on the advice of professional advisers unless there is obvious error in that advice."

From the announcement on 28 October;

"Independent Committee"
the committee of the board of KAZ Minerals formed for the purposes of considering the Acquisition, consisting of the directors of KAZ Minerals other than Oleg Novachuk and Vladimir Kim, being as at the date of this announcement:
(a) Michael Lynch-Bell;
(b) Andrew Southam;
(c) Lynda Armstrong;
(d) Alison Baker;
(e) John MacKenzie; and
(f) Charles Watson