A bid to take Essar Energy private by its biggest shareholder has raised further concerns about the decision to admit several companies based in emerging markets onto the London Stock Exchange despite dubious credentials.
The proposed Essar Energy deal follows a much criticised delisting of Kazakh mining company ENRC corp. which listed onto the LSE in 2007 and was taken private late last year.
Many big institutions quite rightly feel that they have been taken for a ride by companies who listed at premium valuations and are now using the sell off in resource related stocks to take them back into private hands, meaning that the City is crying foul. Mind you, the danger seemed to be clear and the end result was therefore perhaps not surprising. The major investment banks made plenty of money getting these companies onto the LSE.
A perceived lack of corporate governance, alleged corruption and an opaque management structure have all been features of both the Essar Energy and ENRC listings. The Financial Conduct Authority has been criticised for failing to spot deficiencies surrounding ENRC’s LSE application. ENRC first sold shares for 540p and at the time of their delisting the company’s shares changed hands for 217p. The company was bought by a group of investors including founders Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov. Fellow Kazakh LSE listed copper company Kazakhmys Plc (KAZ) owned 26 percent of ENRC.
In April 2013, the SFO (Serious Fraud Office) and then in July 2013 the U.S. Justice Department said that they were investigating the company for alleged fraud, bribery and corruption relating to activities in Kazakhstan and Africa
The company’s closing share price was 217.5 pence a share when the company went private on November 25th 2013 valuing the company at around $4.5 billion.
An RNS from Essar Energy, the Indian energy group, this morning, raised eye brows and accusations of cynical opportunism with a low ball offer of 70p compared to a listing price of 420p. The shares closed today at 68p. “The Proposal comprises a possible offer for the ordinary shares of Essar Energy that EGFL does not already own at a price of 70 pence per share and for the Convertible Bonds at a price of 80 cents.”
The Ruia family’s offer for the 22% of the company that they do not already own is worth around £900 million and with minority share holders having little choice but to accept the knock down price, further controls on the free float of LSE listed companies is being called for.
The Financial Conduct Authority has put in place new listing rules after the ENRC debacle giving shareholders stronger voting rights and influence over corporate decision making.
I’m sure companies based in far flung locations who are planning to list in London will get added scrutiny by investors following the ENRC and Essar situation, particularly if the free float of shares is on the low side and the board include some powerful investors.
The Russian hypermarket chain Lenta has announced plans to float in London with a valuation of over $5bn (£3bn). The company, in which the US private equity firm TPG and Russia’s VTB Capital have the biggest stakes, has jumped a queue of British retailers that are set to follow suit over the next few months. Lenta is expected to raise at least $1billion as its owners sell part of their holdings in the business via a joint listing in Moscow and London. The retailer has 77 hypermarkets and 10 supermarkets in 45 Russian cities, and is seeking to double its selling space within three years.
Lets hope the City boys do their due diligence this time round!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Opportunistic bid to take Essar Energy private with low ball offer follows ENRC debacle
Feb 17, 2014 at 9:37 pm in Market Commentary by contrarianuk
A bid to take Essar Energy private by its biggest shareholder has raised further concerns about the decision to admit several companies based in emerging markets onto the London Stock Exchange despite dubious credentials.
The proposed Essar Energy deal follows a much criticised delisting of Kazakh mining company ENRC corp. which listed onto the LSE in 2007 and was taken private late last year.
Many big institutions quite rightly feel that they have been taken for a ride by companies who listed at premium valuations and are now using the sell off in resource related stocks to take them back into private hands, meaning that the City is crying foul. Mind you, the danger seemed to be clear and the end result was therefore perhaps not surprising. The major investment banks made plenty of money getting these companies onto the LSE.
A perceived lack of corporate governance, alleged corruption and an opaque management structure have all been features of both the Essar Energy and ENRC listings. The Financial Conduct Authority has been criticised for failing to spot deficiencies surrounding ENRC’s LSE application. ENRC first sold shares for 540p and at the time of their delisting the company’s shares changed hands for 217p. The company was bought by a group of investors including founders Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov. Fellow Kazakh LSE listed copper company Kazakhmys Plc (KAZ) owned 26 percent of ENRC.
In April 2013, the SFO (Serious Fraud Office) and then in July 2013 the U.S. Justice Department said that they were investigating the company for alleged fraud, bribery and corruption relating to activities in Kazakhstan and Africa
The company’s closing share price was 217.5 pence a share when the company went private on November 25th 2013 valuing the company at around $4.5 billion.
An RNS from Essar Energy, the Indian energy group, this morning, raised eye brows and accusations of cynical opportunism with a low ball offer of 70p compared to a listing price of 420p. The shares closed today at 68p. “The Proposal comprises a possible offer for the ordinary shares of Essar Energy that EGFL does not already own at a price of 70 pence per share and for the Convertible Bonds at a price of 80 cents.”
The Ruia family’s offer for the 22% of the company that they do not already own is worth around £900 million and with minority share holders having little choice but to accept the knock down price, further controls on the free float of LSE listed companies is being called for.
The Financial Conduct Authority has put in place new listing rules after the ENRC debacle giving shareholders stronger voting rights and influence over corporate decision making.
I’m sure companies based in far flung locations who are planning to list in London will get added scrutiny by investors following the ENRC and Essar situation, particularly if the free float of shares is on the low side and the board include some powerful investors.
The Russian hypermarket chain Lenta has announced plans to float in London with a valuation of over $5bn (£3bn). The company, in which the US private equity firm TPG and Russia’s VTB Capital have the biggest stakes, has jumped a queue of British retailers that are set to follow suit over the next few months. Lenta is expected to raise at least $1billion as its owners sell part of their holdings in the business via a joint listing in Moscow and London. The retailer has 77 hypermarkets and 10 supermarkets in 45 Russian cities, and is seeking to double its selling space within three years.
Lets hope the City boys do their due diligence this time round!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.