WWW.MININGNEWS.NET dryblower
ConsMin and its falling share price
Monday, 18 June 2007
IF THERE really is a second takeover bid looming for troubled manganese miner Consolidated Minerals, Dryblower wonders why the share price is falling?
That was the question which occupied much thinking late last week as reports circulated of a rival move on ConsMin, and investors were busy clipping 17c off the share price.
After opening at $2.80 on Friday, ConsMin fell to close at $2.63.
What made that 6% fall so interesting is that Friday was the day speculation hit fever pitch that the second takeover syndicate, led by former chief executive Michael Kiernan, would ride in to do battle with the original bidder, a group led by former BHP Billiton boss Brian Gilbertson.
At the risk of stating the obvious, when there are two bids for the same business, and both seem well funded and aggressively led, and the share price of the target is falling, something's wrong.
Either the market has overpriced ConsMin in the excitement of the convoluted first bid from the Gilbertson group.
Or there is no rival bid.
Or the board of ConsMin is in disarray and investors are ducking for cover.
Whatever the current situation, and the next few days should throw more light on the fate of the company, there is a simple reason for most of the angst inside a business which should be enjoying boom times as the manganese price rises – but which has now seen its share price fall by 13% since it peaked this year at $3.03 on May 30.
That reason is the "not fair, but reasonable" verdict of an independent export looking at the terms of the original bid.
Apart from the absurd complexity of that offer, which culminated in the production of a monster document occupying some 443 pages, there was equally absurd conclusion "not fair, but reasonable".
Dryblower might be old-fashioned but in his world fair and reasonable are two words that go together so naturally that it is impossible to imagine one without the other.
What the experts at the accounting firm, PriceWaterhouseCoopers seem to be saying is that the Gilbertson-led bid is ok, sort of.
But in the same sentence, they're saying with absolute clarity that the deal isn't fair – a word which, when tested, also means adequate.
Little wonder that there have been stories circulating of ructions inside the ConsMin board.
How on earth could any director stand before shareholders, the people whose money he's managing, and defend a takeover offer which an independent expert has found to not be adequate, sorry, fair.
But recommend and defend the board has done. The chairman, Dick Carter, says precisely that in his two-page letter inside the bid document.
The core of Carter's argument is that Gilbertson, and his team, have the ability to lift ConsMin to greater heights with their deal-making capacity – to which Dryblower says "what deals?" because as far as he can see there's no detail of what lies ahead.
Carter will have his chance to explain in person why he wants to see ConsMin become 60% owned by the Gilbertson syndicate at a series of shareholder and optionholder meetings on July 17.
Between now and then, there is plenty of opportunity for the troubles brewing beneath the surface to bubble over.
That, to Dryblower, is why some investors are taking their money off the table and selling ConsMin shares.
The next question, of course, is who's buying?
It doesn't require too much imagination to see the Kiernan-led rival group using the confusion in the market to soak up a handy position in ConsMin – and it doesn't need too many shares to torpedo the Gilbertson group given that it needs a 75% vote in favour.
At this point, while thinking about what might happen, Dryblower's head is starting to feel as stuffed full of numbers and possibilities as the 443-page PriceWaterhouseCoopers report, and he can tell you that's neither fair, nor reasonable – just confusing.