ERA shares dive as shareholders look to delay capital raise
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The news: Shares in Energy Resources of Australia (ERA) plunged at market open on the ASX after the Australian Government Takeovers Panel confirmed it had received an application from two of the uranium miner's shareholders over its proposed $880 million capital raise that could see Rio Tinto increase its stake in the company to 99.2%.
The numbers: ERA shares were down 14.3% to $0.006 by 10:50am AEST, having shed 54.8% on 28 August on plans for the heavily discounted entitlement offer at a price of $0.002 per share.
Zentree Investments and Packer & Co, which hold 3.04% and 8.82% voting power in ERA, respectively, claim that the offer would see Rio's shareholding increase above the compulsory acquisition threshold of 90%, without an applicable exemption under Chapter 6 of the Corporations Act.
ERA's majority shareholder Rio has committed $760 million to the raise, which could see its stake increase from 86.33% to 99.2%.
Rio has provided an intention statement to ERA noting that it would proceed with the compulsory acquisition of all remaining ERA shares if it acquired the shares.
The context: In their application to the Takeovers Panel, Zentree and Packer & Co claims included, among other things, that ERA and Rio were "taking advantage" of the ongoing litigation regarding the Jabiluka mineral lease and that ERA did not need to raise capital immediately.
Zentree and Packer & Co have sought interim orders that ERA delay the entitlement offer and be prevented from issuing any new shares until no earlier than seven days after the date on which the Takeovers Panel application is determined.
The two shareholders have sought a number of final orders "to protect the rights and interests of shareholders by preventing Rio and its associates from passing the compulsory acquisition threshold".
The Takeovers Panel said that sitting panel has not been appointed yet and no decision has been made whether to conduct proceedings.
In June, the Takeovers Panel declined to conduct proceedings on an application by Zentree, on concerns regarding a future equity raise that could increase Rio's voting power beyond 90%.
The source: Takeovers Panel media release
