NW ore takeover
What does a Hong Kong limousine company know about developing an iron ore deposit in the Pilbara?
That’s exactly what the current Brockman Resources board of directors is thinking, as it continues to unanimously recommend that shareholders do not accept the takeover offer from Wah Nam International.
Brockman’s principal project is the Marillana Iron Ore Project, 100km north-west of Newman in the Pilbara.
In November last year, Wah Nam made a takeover bid for Brockman Resources, offering 30 Wah Nam shares for every one Brockman share.
The issue with this takeover proposal is that Wah Nam is a limited liability company incorporated in Bermuda and listed on the Hong Kong Stock Exchange.
So, if the offer is accepted, existing mum and dad investors would end up with shares in a Hong Kong-listed company that become a logistical nightmare to sell — even with the help of your local stockbroker.
Since the takeover offer was made there has been a six-month tug-of-war between the parties which has resulted, as of last week, in Wah Nam gaining a controlling 52 per cent shareholding in Brockman.
With Wah Nam owning more than 50 per cent of Brockman, it is now in a position to control the composition of the Brockman board and thereby control the operations and strategies of Brockman — subject to the Corporations Act and ASX Listing Rules.
So how did this happen?
Brockman had about 2900 individual shareholders on its register, but the share ownership was top heavy and the top 50 shareholders owned 84 per cent of the company.
Furthermore, Brockman’s Australian-registered shareholders (excluding directors) held only 21 per cent of the company.
Because of the tilted ownership structure, to date, the majority of acceptances have been for large parcels of shares and received from shareholders with addresses registered outside Australia.
So if you’re an existing mum and dad investor out there with a long -forgotten parcel of Brockman shares and don’t want to end up with shares in a Hong Kong-listed limousine company, then I’d recommend you start paying attention to the correspondence from the Brockman board.
At this stage the offer has been extended until June 15 and there may still be a few twists and turns left in this tale yet.
As a side note, at the same time that Wah Nam bid for Brockman it also launched an all-script bid for Brockman’s Pilbara neighbour, Ferraus.
The most recent update has Wah Nam owning 18 per cent of Ferraus.
As with the Brockman case, Wah Nam is looking for 50 per cent ownership to gain control of Ferraus.
If both Brockman and Ferraus disappear from the ASX register it will be just another example of structural ownership of our iron ore companies transferring overseas.
Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time.
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