A clarification on Tuesday that seeks to add no clarity whatsoever:
Further to the announcement yesterday regarding speculation related to a potential combination, Kazakhmys confirms that it is not currently contemplating the implementation of such a combination through a structure that would be classified as a reverse takeover under the rules of the UK Listing Authority.
We are talking here about merger discussions between Kazakh copper producer Kazakhmys and Alisher Usmanov’s Russian steel group Metalloinvest, revealed on FT Alphaville on Monday.
Tuesday’s statement from Kazakhmys is simply a formal dodging of the arcane rule that says if a London listed company is being taken over by a larger, unlisted firm, then the publicly traded shares must be suspended.
So a reverse takeover, in the formal sense of the word, is not currently planned between Kazakhmys and Metalloinvest. Yet, at least.
If, some weeks or months down the road, it is suddenly decided that the best way of structuring a combination of the two companies would be to effect a reverse takeover, with the private company taking over the publicly listed entity, then that will be fine.
While there is a broad spread of opinion on whether this prospective Russian-Kazakh merger will actually happen, we should supply what facts we have:
- Talks between the two sides have been underway for weeks; whether these are “very early stage discussions” rather depends on how long the whole process takes.
- Lehman Brothers is advising Metalloinvest; JPMorgan is working for Kazakhmys.
- As advisers work on the detail, indicative sizes of the respective companies are $20bn for Kazakhmys and $30bn – hence the loose description of this as a reverse takeover.
- Personalities and national pride are key. The Kazakh side want the newly enlarged business to be perceived as a Kazakh company, with Vladimir Kim taking the chairmanship. Yet with Metalloinvest Alisher Usmanov is bringing more assets to the table, and he is projected to have a 30 per cent stake in the combined group.
- Which is where the idea of a voting agreement has come in. Against Usmanov’s holding, Vladimir Kim has 45 per cent of Kazakhmys, while the Kazakh government holds 15 per cent. Together they would have a similar stake to Usmanov’s in the enlarged business.
- So it is probably best to think in terms of an InBev type structure, complete with a parent holding company, two legally-separate entities beneath, and an agreement between the major shareholders to vote together.
- Oh, and with Kim as chairman, the rest of the board would be evenly split.
Related links
Kazakhmys keeps Metalloinvest options open – FT.com
Kazakhmys and Metalloinvest in merger talks – FT Alphaville
Markets Live transcript – FT Alphaville