Chinese state-owned company Guangdong Rising Assets Management (GRAM) has made a bid for Laos copper-gold-silver producer PanAust which values the ASX-listed company at more than Aus$1.4 billion. PanAust operates the Phu Kham and Ban Houayxai projects in Laos, produces close to a third of the developing South East Asian nation's exports and accounts for almost 8% of GDP.
Pan Aust also has a suite of other exploration projects in Laos, Papua New Guinea and Chile. GRAM, which already owns 23% of PanAust, has offered Aus$2.30 a share for the rest of the company.
Last week PanAust stated: “On April 10, the Board of PanAust received a confidential, non‐binding, indicative and incomplete proposal from GRAM to acquire all of the shares in the company by way of an off‐market takeover offer. Under the proposal, GRAM would provide cash consideration of $2.20 cash per share. The proposal included a number of conditions including Chinese and Australian regulatory approvals and 50.1% minimum acceptance. A precondition of the proposal was completion of satisfactory due diligence.
“In subsequent discussions, GRAM has proposed a revised indicative offer price of $2.30 cash per share. The company has considered the proposal and the revised indicative offer price. Zezhong Li, the GRAM Board nominee, was excluded from all deliberations in respect of the proposal.
“On behalf of the PanAust Board, the chairman has written to GRAM advising that this price remains materially below the level at which the Board would be prepared to recommend a takeover offer to its shareholders. The company has agreed to permit GRAM access to due diligence information (upon execution of an appropriate confidentiality agreement), to assist it to materially improve its indicative offer price.
“At this stage, there is no takeover offer from GRAM that is capable of acceptance by the company’s shareholders and there is no certainty that one shall eventuate.”
Laos, a poor landlocked nation squeezed between China, Vietnam, Thailand, Myanmar and Cambodia, is gradually attracting more foreign investment to help extract its mineral riches and underpin its economic development, despite a flimsy regulatory framework and claims of corruption. Western companies including Coca Cola have started setting up facilities in Laos, although China and Vietnam have forged far deeper ties with the country’s communist administration. China Minmetals Non-Ferrous Metals bought the Sepon gold-and-copper mine in 2009.
PanAust says it is also open to rival bids. “We know the groups to approach to add competitive tension, so it’s up to Guangdong to put their best foot forward and put up a better price,” chief executive Gary Stafford said.
The Australian company agreed last year to buy Glencore Xstrata PLC’s controlling stake in the Frieda River copper-and-gold project in PNG. Gary Stafford says the bid multiples implied by the Frieda River deal and other recent mine acquisitions indicated Guangdong’s offer is “lowball”.