Stanmore Coal urged to pay out special dividend
Stanmore Coal has been called on to pay a special dividend to shareholders before yielding to a foreign takeover offer.
Stanmore Coal should pay a special dividend to shareholders to burn through the remainder of its franking credits before yielding to a takeover offer from its biggest shareholder, according to shareholder and activist fund manager Sandon Capital.
Sandon Capital on Tuesday called on the Stanmore Coal board to pay a special dividend to use up the company’s remaining franking credits ahead of its all but inevitable takeover by Indonesia’s Golden Investments.
Golden, a subsidiary of Indonesian coal major GEAR, lobbed a $1-a-share bid for Stanmore early this month, its second tilt at the Australian coal producer in 18 months, and now holds a controlling 51 per cent stake in the company.
But with the Indonesian company seemingly in the box seat to win full control of Stanmore with its on-market takeover bid, Sandon analyst Campbell Morgan says the company should use its cash position of $47.8m at the end of March and return to minority shareholders the value of its remaining franking credits, which are of no use to its Indonesian suitors, by paying a 28c-a-share dividend before the company folds.
In a letter to the Stanmore board, Mr Morgan said Stanmore should ensure its Australian investors received the full benefit of the takeover package.
“We believe the offer from Golden Investments should be amended to reflect the value to Stanmore shareholders of the franking credits held by the company. Any offer that does not recognise these franking credits to the company’s shareholders is a sub-optimal outcome,” he said.
“By our estimation, Stanmore has sufficient cash, retained profits and franking credits available to allow it to pay a fully franked special dividend to its shareholders of approximately 28c per share, with approximately 12c per share of imputation credits attached. Naturally, we expect the cash consideration of the offer would be reduced by the amount of the special dividend, leaving the total cash costs of the offer unchanged at $1 per share.”
Golden’s unconditional on-market bid goes live on Friday, and Stanmore is yet to release its target statement, with the company’s board still considering its options.
It has recommended shareholders take no action until its independent board committee makes a call on Golden’s valuation of the company, but its relationship with its biggest shareholder has been fractious since Golden’s initial 95c-a-share offer failed to win over shareholders early last year.
The success of Golden’s offer will rest on winning control of the 19.9 per stake of Stanmore controlled by M Resources, a coal trading company owned by Matt Latimore that is yet to indicate its view on the bid.