Stanmore Coal's independent directors recommend accepting Golden Energy's offer

THE independent directors of ASX-listed Stanmore Coal are recommending that its shareholders accept a S$1 per share unconditional cash offer by mainboard-listed Golden Energy and Resources (Gear). 

In a circular released on Wednesday evening, Stanmore's independent directors Stewart Butel, Stephen Bizzell and Neal O'Connor said that Gear's offer price represents "certain value", given risks and uncertainties inherent in Stanmore's business. 

These risks include the volatility caused by the Covid-19 outbreak, changes in the price of coal, operational risks at Stanmore's Isaac Plains Complex and changes in regulations. 

With the ongoing Covid-19 outbreak, the premium implied by Gear's offer price is "not unreasonable", the directors said. The price represents a 22 per cent premium to Stanmore Coal's closing price of A$0.82 on the Australia bourse on April 1

Liquidity constraints are another factor, considering that Gear already owns 50.57 per cent of Stanmore. "Following the offer, it is likely that the market for Stanmore shares will be less liquid than... prior to the offer. A reduction in liquidity may mean that if you do not accept the offer, it may be more difficult for you to realise your investment in Stanmore shares," the directors said. 

In addition, Gear has indicated that it will reconstitute the board following the offer, which may lead to changes in whether Stanmore continues to be listed on the ASX, or in its dividend policy. Stanmore shareholders who do not vote in favour will be minorities in the Gear-controlled company. 

Shares of Gear traded at S$0.17 as at 3.43pm on Thursday.