Aim, London’s junior market, just never disappoints when it comes to weird and wonderful corporate stories.
The latest concerns Prosperity Minerals, which owns an iron ore trading operation in China and stakes in several Chinese cement businesses.
On Monday it announced a deal to sell Upper Value Investments Limited, the subsidiary that owns virtually all of its cement assets, along with with what it terms “certain shareholders loans outstanding” for £312m.
To put that figure into perspective, that’s the equivalent of 232p a share for Prosperity, or 3.5 times Prosperity’s share price before Monday’s statement. It’s also 86p more than the company’s 2006 flotation price.
Now post sale, Prosperity will have net cash, its iron trading business (which had sales of $470m last year) and an interest in something called Anhui Chaodong Cement, which is currently worth just over £60m.
Yet post-statement Prosperity’s market value stands at just£131m, indicating the shares have yet to fully price in the good news…
Now, that could be down to the fact that the buyer - TTC International, a Hong Kong listed company incorporated in the Cayman Islands, is loss making and has a market value of just $575m.
The deal also has conditions.
The aggregate consideration for the Possible Disposal, as stated in the Memorandum of Understanding is expected to be in the region of HK$4 billion (c. £312 million). However, the MOU is non-legally binding and is subject to the execution of a formal agreement in regard to the Possible Disposal (the “Formal Agreement”).
However, the two companies expect to sign a formal by the end of December and the price tag for Upper Value, we are told, can be explained by the fact that Chinese investors simply value cement more highly than Westerners. And they are apparently prepared to pay up, almost certainly in cash.
Who said there was a bubble in China?
Related link:
The Regal report – FT Alphvaille