A $30m acquisition of shares in the failed beauty products company BWX is not the only deal billionaire Andrew Forrest likely wishes he never embarked on, with some suspecting he may now make moves to backpedal out of his $752m proposal to buy nickel miner Mincor.
Everyone from analysts to fund managers to the company itself say that Mincor shareholders should grab the $1.40 per share offer on the table from Wyloo, the private company of Forrest, the Fortescue Metals executive chair.
But some think that Forrest, whose Wyloo owns 23.24 per cent of Mincor, may be plotting a way to get out of it.
Mincor told the market after the bid landed on March 21 that it was delivering ore in to its offtake with BHP which was not to specification of the agreed offtake terms due to higher arsenic levels, and as the pair work through the problem it has had to revise its earnings guidance.
It said in its target statement that Mincor shareholders should take the offer from Wyloo, which was a 35 per cent premium to the last traded share price, and analysts at Shaw and Partners said they agreed.
Working for Wyloo is Bank of America, while Mincor is advised by Barrenjoey and Sternship Advisers.
Observers believe Wyloo may use an insolvency provision in the takeover agreement to extract itself from its unconditional offer, which it has been declared final.
It could argue the company knew about the situation with the BHP offtake before the bid was made, and did not disclose it to the market, and without a deal Mincor would likely need to embark on a highly dilutive equity raising.
One possible outcome is that Wyloo and Mincor negotiate behind the scenes, where Mincor enables Wyloo to drop the offer price to prevent the bidder taking measures to extract itself from its unconditional offer all together.
The offer was a 35 per cent premium to the previously traded share price.
Mincor’s nickel production in Kambalda is important to BHP as it needs the concentrate to blend with its own product, Shaw said.
BHP has signed a processing and offtake agreement for all of Mincor’s output to December 2025 which significantly de-risks the project.
It’s been a tough few weeks for Forrest.
Not only does he have the Mincor headache to deal with, BWX, of which he is a 20.3 per cent shareholder, entered receivership this week.
The Forrest family’s Tattarang became a substantial shareholder in BWX, the company behind skincare products like Sukin, in June, acquiring a 16.9 per cent stake for $30.22m when shares were around $1.
He has since lifted his stake to 20.3 per cent, but it is now effectively worth nothing, trading at 20c before its collapse.
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