Legendary corporate raider Ron Brierley is back. Pic: Getty
‘Time to call a halt’: Ron Brierley’s Mercantile bids for Bauxite Resources
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New Zealand corporate raider Sir Ron Brierley has launched a takeover bid for Bauxite Resources, with a plan to sell off its assets and return cash to shareholders.
Sir Brierley is pursuing the explorer through his latest business, Mercantile Investment Company (ASX:MVT).
It’s offering 9c for one of every two shares Mercantile doesn’t control, representing a 14 per cent increase on the last traded price of 7.9c.
It values the company at $19.3 million, Mercantile director Gabriel Radzyminski confirmed.
Mercantile is not listed as a substantial shareholder nor is it among the top 20 as at June 30.
Mr Radzyminski told Stockhead they will reveal Mercantile’s current stake in Bauxite when they release the bidder’s statement.
Bauxite CEO Sam Middlemas told Stockhead the takeover news came as a “complete surprise”.
“The news wasn’t even delivered to us, it was lodged on the stock exchange.
“We know about as much as you.”
He believes Mercantile has a very small shareholding in Bauxite (ASX:BAU).
One of Bauxite’s greatest assets right now is the $16.3 million cash it has sitting in the bank.
Among Mercantile’s other takeovers this year are listed shell EZA, which had $9 million in cash, and MHM Metals, which had $5.4 million in cash.
Mr Brierley has kept a relatively low profile since retiring as chairman of Guinness Peat Group in 2008.
‘Time to call a halt’
Mercantile makes its offer after accusing Bauxite of wasting shareholders’ time and money.
“After 10 years unsuccessfully searching for bauxite, lithium and silica sands, it is time to call a halt,” Mercantile chairman Sir Brierley said in a letter to shareholders.
“The best use of remaining surplus cash is back in shareholders’ hands.”
If the takeover succeeds, Mercantile will immediately pay shareholders 6c a share, terminate a joint venture with HD Mining & Investment, and stop all exploration activities.
It also plans to sell off all Bauxite’s (ASX:BAU) assets, including two farms, and pay the proceeds to shareholders once debts have been cleared.
“The above represents the most effective way of reducing cash burn to NIL,” Sir Brierley said.
“Bauxite first listed on ASX in 2007. It has never found anything remotely viable and has chalked up losses of $48 million in the process.
“The latest annual report states: ‘The company is also looking for other business opportunities to better utilise cash resources’. We regard that statement as ominous.”
The Bauxite board has recommended shareholders take no action.
Bauxite Resources had negative cash flows of $245,000 in the third quarter, and customer receipts of only $35,000.
It burned $259,000 on staff and admin costs, but only $108,000 on exploration.
