Takeovers Panel declines proceedings over future ERA equity raise
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The news: The Australian Government Takeovers Panel has declined to conduct proceedings on an application by Singaporean family office Zentree Investments, which outlined concerns regarding a future equity raise that could see Rio Tinto acquiring Energy Resources of Australia (ERA).
The numbers: Rio Tinto is ERA's largest shareholder with 86.33% of shares. Zentree, a minority shareholder in ERA, said the equity raise would increase Rio's voting power beyond the compulsory acquisition threshold of 90%.
ERA's second largest shareholder is Packer & Co. with 9.32%.
The equity raise relates to the rehabilitation of the Ranger mining area which Rio agreed to directly manage in April after costs blew out. ERA previously outlined spending of $1.2 billion on rehabilitation activities but now expects costs to exceed $2.4 billion.
The context: The panel said it considered the application "premature" because the key circumstance underlying the application — ERA's potential capital raising — had not yet commenced and there is no certainty that unacceptable circumstances will arise.
In a release to the market after the decision, ERA said its work in relation to potential funding options was continuing and the company will keep shareholders updated on any material developments.
In May, the Takeovers Panel received an application from Zentree that claimed, among other issues, that minority shareholders did not have a reasonable and equal opportunity to participate in the substantial benefits that would accrue to Rio.
It also claimed that Rio "has been executing a strategy for almost 10 years to achieve 100% ownership of ERA without having paid a premium for control to the minority shareholders".
The Takeover Panel said at the time that Zentree sought "interim orders that ERA delay the equity raise and be prevented for issuing any new shares to any person no earlier than seven days after on which the application is determined".
The sources: ASX announcement, ASX announcement
