Bradken told the Australian Stock Exchange that CHAMP had made an unsolicited recapitalization bid, which involved two share placements worth $150 million. If that were allowed, CHAMP would have ended up owning 49.9 per cent of Bradken. In other words, it would have given CHAMP a potential blocking stake.
Bradken is among Australia’s mining companies that have been hit by plunging commodity prices as growth in China’s materials-intensive economy slows.
But it said in an update Thursday that trading conditions had stabilized in the March quarter, and that it had 16 per cent higher orders than in the same period last year.
The proposal from CHAMP had asked for the appointment of a new chairman, and a $1.5 million break-up free if another player made a proposal to buy Bradken. Its share placements were at 75 cents and $1 per share, which the board felt did not reflect fair value.
Last year, Bradken had rejected a conditional A$428 million offer from Koch Industries and Pacific Equity Partners.
CHAMP, which has $2 billion in funds under management, used to own Bradken until 2004, when it sold its stake in an initial public offering. Since 2014, it has shown renewed interest in Bradken and invested A$70 million ($54 million) in June last year, along with Chile’s Sigdo Koppers SA. CHAMP had then explored a merger of Sigdo and Bradken, which did not materialize.
Australia’s miners, crippled by more than $1 trillion in debt, are becoming attractive for specialist buyout funds which look for markets where prices are down, mines are losing money and competition is weak. Funds might be willing to invest as much as $3 billion, according to corporate finance and restructuring firm FTI Consulting.
In February, DEALSTREETASIA had reported that steel and iron ore group Arrium, with nearly $2 billion of debt, had secured $927 million in funding from GSO Capital Partners, the global credit and alternative investment arm of Blackstone Group. That funding will help the company retire debt and restructure its business.