Kazakhmys, which owns a 26% stake in London-listed ENRC, said today it wants to ‘end [its] association with ENRC’ – even if that means accepting a less-than-persuasive offer by a consortium including the miner’s co-founders Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev, and the Kazakh government.
The consortium has offered shareholders $2.65 in cash, plus 0.230 Kazakhmys shares for the 46% of shares it doesn’t already own. That puts the value of ENRC at about £3bn – although after shares fell 2.8% today, its real value is more like £2.7bn.
Kazakhmys has made it crystal clear that it isn’t happy with the offer, saying it ‘undervalues’ ENRC. But it added that it’s the ‘best alternative’, and that the offer is ‘the only realistic opportunity to realise value for the group’s investment’.
You can see why it’s keen to get out: life as an ENRC shareholder is by no means straightforward. Although ENRC’s shares climbed as high as £12.50 after it floated in December 2007, things quickly turned sour in the boardroom.
In December 2010, non-executive directors Sir Richard Sykes and Ken Olisa accused the chairman and chief executive of being ‘in the pocket’ of some of its shareholders. In June 2011, Sykes said the firm should ‘never have listed in the first place’ – after which he and Olisa were swiftly voted off the board.
In April this year, chairman Mehmet Dalman resigned, saying he had ‘achieved all I can’ – as the Serious Fraud Office continued its investigation into accusations fraud, bribery and corruption in its businesses in Kazakhstan and Africa. It’s worth mentioning that that isn’t just bad for shareholders – it’s also damaged the reputation of the City of London generally.
Not surprisingly, shares for Kazakhmys are down by almost 10% today. A small price to pay to get out of the corporate governance equivalent of an Eastenders storyline…