Refresh the lower limit: Glencore takes advantage of Covid to rob the privatized Katanga Mining Industry

SMM: on April 22, Katanga Mining announced that it had reached a privatization agreement with Glencore International at an acquisition price of C $0.16 per common share, a premium of 100% to the previous trading day's closing price of C $0.08, a premium of 139% over the previous 20 days' volume-weighted average price, and a 60% premium over the valuation range offered by KPMG.

The special committee of the Board of Directors of Katanga Mining agreed that the merger was in the best interests of the Company and was fair to shareholders (except Glencore International) and recommended that the Board approve the merger and recommend that shareholders vote in favour of the merger.

Glencore's desire to privatize Katanga is well known.

Last November, Glencore poached Mark Davis, vice president for Africa, from Minmetals, a Chinese miner. After the acquisition of TFM by Luoyang Molybdenum Industry, Minmetals Kinsevere Copper Mine and Glencore are large mining and dressing enterprises with western background and international operation. RTR of Eurasian Resources is recycled for tailings and has just been put into production. Ivanhoe and Zijin joint venture Camoa is under construction, and almost all the others are Chinese mining enterprises. This is why Glencore has wantonly dug people from Minmetals resources. Since the salary is high, there must be follow-up actions.

Sure enough, while poaching, Glencore swapped $5.8 billion of Katanga mining's debt for equity. The conversion price was initially set at C $0.26, but Glencore's control of the company and disregard for the interests of minority shareholders allowed minority shareholders to vote with their feet and the share price tumbled 70 per cent to C $0.115 on the same day. Glencore subsequently revised the conversion price to C $0.1295, meaning a further increase in the share capital available to $5.8 billion in debt and a 32-fold dilution of the total share capital. In the end, none of the old shareholders subscribed, and Glencore's stake in Katanga Mining, a listed company, rose from 86.3% to 99.5%, basically losing its circulation and investment value. In this case, Katanga is only in Glencore's pockets. How to take it only to look at Glencore's face.

As shares of major mining companies plummeted during the outbreak, shares in Katanga fell to 6 cents at one point, and Glencore finally arrived at the best time to buy, hurriedly launching a privatisation plan before the Katanga 2019 newspaper was released. Although the scheme represents a 100 per cent premium to the current trading price, it is still less than 30 per cent of the share price before the debt-for-equity swap was launched last year. During the epidemic, the special shareholders' meeting will be held in the form of a telephone meeting, and even the minority shareholders will not be given the opportunity to safeguard their rights at the scene. Minority shareholders just bolted the fish between the knives.

The merger must be approved by a special majority at the general meeting, that is, 2 / 3 of the number of votes cast by the shareholders present or represented at the general meeting, and Glencore plans to vote all of its 60870439243 ordinary shares, representing approximately 99.5% of the common share ratio of the merger, it does not matter whether the minority shareholders vote or not.

Glencore also reminded that under the Yukon Company Act of Canada, registered shareholders in Katanga could object to a special resolution of shareholders who approved the merger. If the merger is completed, opposing shareholders who strictly abide by the procedures stipulated in the Company Law will be entitled to the fair value of their common shares in accordance with Article 193 of the Company Law. Under the Company Law, dissenting shareholders may apply to the court to determine the fair value of their common shares. Failure to comply with the requirements of Article 193 of the Company Law may result in the loss or inability to obtain any right to dissent.

As a genetically savvy mining and commodity trading company, Glencore believes in the supremacy of interests and has never been lenient. Not long ago, the Zambian government strongly opposed the closure of Zambia's high-cost copper mine, Maponi, because of the epidemic, and even detained the director of the Maponi mine, who was preparing to leave the country at the airport, and threatened to cancel the permit for the mine. After a standoff, Glencore finally withdrew its decision to shut down Maponi on Monday. What is the number of infections in Zambia? To date, there are only 70 people, and the death toll is only three, far lower than in neighboring Congo. Glencore's shutdown was more about layoffs by the epidemic, but it was seen through by the government.

The outbreak has given mining giants the opportunity to privatize small listed companies, similar to Katanga Mining, Rio Tinto's de facto control of Canadian-listed Turquoise Hill Resources.

In addition, the long-term low valuation of resource stocks by Hong Kong stocks also provides a reason for the privatization of state-owned enterprises. At present, the international situation is complicated, maintaining the comparison between the high cost of overseas listed companies and the financing space that has actually been lost, the infatuation of domestic major shareholders for the control of listed companies and the comparison of foreign shareholders' disapproval of listed companies of state-owned enterprises. all make Hong Kong shares listed like chicken ribs. With the help of Hong Kong stock listing to achieve the ideal of internationalization of enterprises encounter bone reality.

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