Sias calls on Golden Energy to make shareholders a better offer 

THE Securities Investors Association (Singapore) (Sias) is appealing to Golden Energy and Resources : AUE 0% (Gear) to revise its offer upwards for “compelling reasons”.

In a letter sent to the company’s chairman and board of directors on Tuesday (Feb 28), Sias president and chief executive David Gerald said the offer price should be higher after accounting for the value of Australia-listed Stanmore Resources, which Gear has a 65 per cent stake in.

Stanmore by all accounts is a profitable, resilient company, wrote Gerald – a fact which he believes is ignored by both Gear’s two exit offer options comprising an all-cash option, and an option to receive a combination of cash and shares. 

He highlighted that Stanmore’s shares have risen considerably in the three months since the Nov 9 offer.

At the Feb 28 closing price of A$3.53, Stanmore had a market capitalisation of A$3.18 billion (S$2.9 billion) – which implies that Gear’s stake in the company is worth at least A$2.04 billion, added Gerald.

“It is this runup in Stanmore which we believe has probably prompted SGX RegCo to state in its instructions to the IFA that ‘if there are any material changes to the traded price of the company’s component assets that have taken place since the announcements, the IFA should consider these changes’.”

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Gear should also up its offer while ignoring the company’s Nov 8, 2022 closing price of S$0.67 – which he views as “not a reasonable indicator” of Gear’s market price as this represented a one-off plunge.

Revising the offer upwards in view of these reasons “will be fair to shareholders”, said Gerald.

To recap, the company in November 2022 proposed a break-up and delisting via two options that includes a distribution in specie of its 62.5 per cent stake in Indonesia-listed thermal coal subsidiary Golden Energy Mines (Gems).

The company’s shareholders can either choose to receive 1.3936 Gems shares, which were trading at 7,100 rupiah at the time of the announcement, for every Gear share they hold – or a cash consideration of 7,664.8 rupiah (which prices their entitlement of 1.3936 Gems shares at 5,500 rupiah each).

Gear then proposes to delist itself from the Singapore Exchange, with an exit offer price of S$0.16 per share.

Those who opt to receive Gems shares will be getting a total effective consideration of S$1.045 per share, while the all-cash option implies a lower effective consideration of S$0.846 per share.

Sias’ appeal comes after a minority Gear shareholder took to public forums and media, whilst also lodging complaints with local regulators, to express his position that Gear’s current exit offer “hugely undervalues” the company.

The association agrees with this shareholder, wrote Gerald in his letter to Gear.

“Sias acknowledges that in any privatisation-cum-delisting bid, buyers will always pitch their price as low as possible so as to extract the maximum value, whilst sellers will always want to receive top dollar. As such, a fair settlement price should lie somewhere in between these two extremes. The problem is that as it stands now, shareholders feel that what is on the table is too low to be remotely described as fair to minorities.”

Shares of Gear were trading S$0.01 or 1.2 per cent higher at S$0.87 as at 3.58pm on Wednesday.