Reputational engineering

20 May 2013 By Kevin Allison

An independent board committee has rightly rejected a lowball bid for the miner from its three founding oligarchs and the Kazakh government. Whether a higher price can be extracted depends less on ENRC’s prospects than on how much the bidders are willing to pay to save face.

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ENRC’s founding shareholders and the Kazakh government offered $2.3 billion to buy out the 44 percent of ENRC that they do not already own, according to a weekend statement, valuing the entire mining company at just under $5 billion.
The offer, which was rejected by an independent committee of ENRC directors, was composed of 175 pence of cash, plus 0.231 shares in rival mining group Kazakhmys, for every share of ENRC the bidding group does not already own. The Kazakhmys shares were to come from the Kazakh government’s 27 percent stake in the rival miner. The Kazakh government owns about 12 percent of ENRC.
Kazakhmys, which itself owns 26 percent of ENRC, said its holding in the miner was “not considered a strategic investment,” and that it would give “due consideration” to any proposal made by the bidding consortium “at the appropriate time”.

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