Gutnick takeover play with Merlin Diamonds falters

A MYSTERIOUS bid for Merlin Diamonds has collapsed after revelations involving company chair Joseph Gutnick.

A MYSTERIOUS bid for Melbourne-based Merlin Diamonds has collapsed after revelations the company's chairman, colourful mining magnate Joseph Gutnick, switched his allegiance from the takeover target to the suitor during the offer period.

Singapore investment firm InnoPac Holdings said yesterday it had gained acceptances for 73 per cent of Merlin shares when the offer closed on Friday night, which was below the 90 per cent minimum level stipulated in its bidder's statement. InnoPac said it had decided to let the offer lapse rather than increase its already generous 28c-per-share offer, which represented a 125 per cent premium on yesterday's closing share price.

InnoPac's failure to win over a sufficient number shareholders follows a series of reports in The Australian last week that detailed how Mr Gutnick bought a major stake in InnoPac soon after the Singapore-listed firm announced a friendly bid for Merlin on January 31.

After paying $51m to emerge with 12 per cent of InnoPac, Mr Gutnick then sold down his controlling stake in Merlin to less than 1 per cent, meaning he had effectively swapped camps during the offer period. He did so despite telling Merlin shareholders in March that he and his fellow directors recommended the InnoPac deal.

The magnate disclosed his Merlin sales to the Australian Securities Exchange. But many shareholders in Australia did not know -- unless they were reading substantial shareholder notices sent to the Singapore stock exchange -- that their chairman had become the biggest shareholder in InnoPac.

The Australian Shareholders Association said last week it was concerned that Mr Gutnick, as chairman of Merlin, had not kept the company's retail shareholders fully informed about his share trading.

Mr Gutnick, who remains executive chairman, is yet to explain to Merlin shareholders why he decided to sell down his controlling stake in the company and buy a major stake in InnoPac rather than sell into the takeover.

It is unclear whether he will remain as Merlin's chairman, given he has effectively sold out of the company.

Despite the failure of the takeover, InnoPac still appears to have secured some form of control over Merlin.

This is because Mr Gutnick sold his Merlin stake in March to a group of Singaporean businessmen who all have links to InnoPac.

In total, six Singaporean business identities -- all of whom are shareholders or linked in some other way to InnoPac -- bought 63 per cent of Merlin Diamonds between December 31 last year and March 21 this year.

ASIC did not take action to halt the planned takeover before the offer period closed last week.

Merlin Diamonds, which owns the Merlin mine in the Northern Territory, has been a key plank of Mr Gutnick's long-time dream of making billions of dollars by exploring for the precious stones.

InnoPac chief executive Wong Chin Yong said in January the bid for Merlin would make InnoPac the only diamond miner listed in Singapore and probably in Asia.

Merlin Diamonds could not be reached for comment. The company's share price was unchanged at 12.5c.