Unlisted public company Phosphate Resources Limited could soon be heading to the Australian Stock Exchange through a merger plan with its listed takeover suitor Asset Backed Holdings Limited.
The merged entity will be an ASX-listed company with annual revenues of about $55 million from exports of about 700,000 tonnes of Christmas Island phosphate a year.
The boards of both companies support the merger plan, which values the phosphate miner at about $11.2 million.
To succeed the scheme of arrangement needs the approval of 75 per cent of PRL’s shareholders, many of whom are members of the Union of Christmas Island Workers.
UCIW secretary Gordon Thompson said he was taking a wait and see approach to the merger plan, with the composition of the merged company’s board one of his main considerations.
That board composition is not likely to be known until a scheme booklet is released. This will probably take place in late March.
Under the terms of the scheme ABH will buy the 57.85 per cent of the PRL shares it does not already own for $1 cash and 11 ABH shares.
Considering the notional value of the merged entity, the boards expect those shares to be worth 20 cents each.
ABH managing director Mark Caruso said PRL was starting to enjoy some of the benefits of its proximity to its main markets in South-East Asia as freight costs continued to rise.
The company’s nearest competitors are in the Middle East.
PRL’s unaudited profit before tax for the seven months ended January 31 was $5.9 million, including an extraordinary item of $3.2 million.
The company has forecast pre-tax earnings of $4 million for the full year excluding the extraordinary item.
According to the scheme announcement ABH has about $4 million in cash, with about $2.2 million of that to be used to fund the cash component of the merger.
Where the deal could stumble is with the union, given it was responsible for the creation of PRL in the early 1990s.
Mr Caruso said he understood the union to be behind the deal.
Mr Thompson said he could see some benefits in the merger plan, but was also hearing arguments that the PRL shares were being undervalued in the deal.
“This is the most important decision PRL’s shareholders and the [Christmas Island] community has to make,” he said.
