THE game is afoot for Phosphate Resources Limited with takeover suitor Asset Backed Holdings making its intentions official through the release of its bidder statement.
As expected, Asset Backed is offering $3 for every PRL share it does not own.
Asset Backed already owns 35.45 per cent of PRL.
PRL company secretary Peter Torre said the board was waiting for an expert’s report from Ernst & Young – the first draft is due by the end of next week – before making its response to the bid.
Asset Backed says it has taken a $2 million loan from BankWest to part-fund its takeover.
The company also has $4.3 million in cash and recently launched a $700,000 share placement to part fund the bid.
The PRL bid comes just days after Asset Backed cancelled a deal to buy China-based phosphate business Norwest Chemicals for $6.4 million, split between cash and shares.
Norwest Chemicals is owned by Asset Backed director David Argyle.
Initially it was thought that Asset Backed would marry PRL’s phosphate business to Norwest’s offerings and create a regional phosphate chemicals player.
Now, according to the bidder’s statement, Asset Backed wants to conduct a strategic review of the PRL business and the composition of its board, review PRL’s work practices and review advanced stage resource project opportunities that could be exploited.
The review of work practices is likely to put Asset Backed at odds with one major PRL shareholder activist group, the Union of Christmas Island Workers.
WA Business News was unable to contact union secretary Gordon Thompson, however, he has previously expressed his antipathy towards Asset Backed, and Mr Argyle in particular.
Mr Thompson has previously told WA Business News that one of his concerns is that Asset Backed would dismiss much of the workforce and bring in contract labour.
PRL was created in the early 1990s to bring work back to the Christmas Island phosphate miners.
The phosphate mine on the island was owned by the Australian government, which shut it down in the 1980s.
Most of the island workers are shareholders in PRL.
Ironically, it was the union’s attempt to negotiate a new enterprise bargaining agreement with PRL that led to the takeover bid.
In return for a wages freeze, some reductions in conditions and some redundancies, the union wanted 19.9 per cent of the listed capital in PRL put into a community trust.
That would have diluted the stakes of all other shareholders, Asset Backed included.
Asset Backed director David Argyle told WA Business News that the union’s share placement move had sparked the bid.
Another issue to some shareholders is that PRL, which boasts an operating revenue of about $50 million a year, is likely to post a loss this year.
Mr Torre said the company’s results had not been audited yet but it was likely to either be a loss or, at best, a very small profit.
