Takeovers Panel to reconsider Rio Tinto-ERA minority shareholders decision

Panel orders a stay on the ERA raising as Rio Tinto offered a second chance over the outcome.

Rio asked the panel to review its decision.

The Takeovers Panel will take a second look at its decision to block Rio Tinto from using its position on uranium miner ERA to snuff out minority shareholders, with the panel saying it will examine a December decision ruling its move on the ERA register was made in “unacceptable circumstances”.

The decision handed dissident ERA shareholder Richard Magides at least a moral victory over Rio Tinto, even if it did not block a $476m entitlements issue – demanded by Rio as the only way it would cover the clean-up costs of ERA’s Ranger uranium mine in the Kakadu National Park.

But the Takeovers Panel did order a stay on Rio’s rights to use the Corporations Act to mop up minority shareholders if it exited the 15c a share entitlements issue with more than 90 per cent of ERA’s expanded stock – a likely outcome given few of ERA’s other shareholders were likely to reinvest in a company with effectively no future.

If Rio was the only holder to take up its rights it would move from 68.4 per cent of ERA’s share register to 95.6 per cent, effectively diluting minority shareholders out of existence.

Rio asked the panel to review its decision, most likely targeting that aspect of the panel’s ruling, and won a second chance at making its case on Monday, with the Takeovers Panel agreeing to a new round of proceedings to consider Rio’s appeal.

The panel ordered a stay on the ERA raising until it had finalised its deliberations.

Mr Magides, through his privately owned Zentree Investments, had built up a 15.9 per cent stake in ERA, and has consistently argued the company should extend mining at Ranger, despite Rio’s desire to get out of the uranium business in the environmentally sensitive area.

Rio has long believed his stake was built up in an attempt to force a takeover premium for the shares it did not own, however, and demanded ERA fund an estimated $475m shortfall in the cost of rehabilitating Ranger by issuing new shares, rather than making an offer for minority stakes and making good on its promise to fully fund the clean up itself.

ERA said on Monday it would comply with the panel’s new orders. Its shares closed up 0.5c to 15.5c. Rio Tinto slipped by 0.3 per cent to $102.08.