The Australian government's Takeovers Panel has upheld its decisionto order ABM Resources NLto drop its 3-for-5 nonrenounceable rights issue after a review panel agreed withthe regulator's original rulingthat the circumstances of the capital raising were "unacceptable."
The Takeovers Panel intervened after concerns were raised thatthe rights issue could pave the way for a possible takeover of the Australian goldexplorer by its largest shareholder, Pacific Road Capital Management Pty. Ltd.
The regulator said April 29 that its decision will not preventABM from proceeding with a modified or new rights issue.
ABM planned to raise around A$8.2 million via a 4-cent-per-sharerights issue, and had struck a deal for a A$3.8 million debt facility.
Pacific Road Capital Management Pty. Ltd., which holds a 19.85%stake in the company, agreed to fully subunderwrite the rights issue and, at ABM'srequest, provide the debt facility.
Proceeds from the rights issue were principally to be used forthe exploration and evaluation of ABM's core gold projects in Australia's NorthernTerritory, while funds drawn down from the debt facility were to be placed in interest-bearingterm deposits to cash back performance bonds associated with the projects.
ABM said in a separate April 29 statement that prior to announcingthe rights issue, it considered a number of alternative funding solutions includinga proposal from APAC Resources Capital Ltd., a wholly owned subsidiary of Hong Kong-listedcompany APAC Resources Ltd.
APAC, ABM's second-largest shareholder, with a 14.8% interest,initially proposed to underwrite a renounceable rights issue to raise A$14 millionat 1.5 cents per share, which would have resulted in the issue of 933 million newshares.
Subsequently, APAC revised the pricing of its proposal to 2.25cents per share, reducing the number of new shares to be issued to 622 million,though still more than three times as many shares as would be issued under the rightsissue.
ABM decided that the rights issue was superior to the APAC proposaland in the best interests of shareholders as it would result in significantly lessdilution of shareholders who did not take up their rights.
The company's decision prompted APAC to submit an application to the Takeovers Panel claiming thatthe rights issue, underwriting and debt facility arrangements with Pacific Roadwere being used as a means of gaining control of ABM without Pacific Road makinga takeover offer.
ABM, however, said there were potentially greater control issueswith APAC's revised proposal, particularly in circumstances where no other shareholdertook up their rights, because it would give APAC control over 69.7% of the company'sshares.
The APAC proposal also contained a condition that one of itsnominees be appointed as chairman, which together with APAC's existing directorwould give the major shareholder effective control of the four-member board.
ABM has now mandated Patersons Securities Ltd. to arrange a newrenounceable rights issue to raise between A$10 million and A$12 million, with pricingto be set by the company in consultation with Patersons.