Spinifex: Flinders ruling should be a red flag for boards
Stuart McKinnonThe West Australian
Saturday, 16 February 2019 9:18AM
Margo Gould, spokesperson for minority shareholders, centre, and other minority shareholders of Flinders Mines outside the company's West Perth offices. 11 JANUARY 2019Picture: Picture: Danella Bevis, Danella Bevis The West Australian
This week’s Takeovers Panel ruling in the case of Flinders Mines has put company boards on notice — ignore minority shareholders at your peril.
For those unfamiliar with the story, the aspiring Pilbara iron ore player announced plans to de-list from the ASX in December, sending its share price tumbling more than 50 per cent.
And as it turned out, the only shareholder in favour of the move was its 55 per cent majority owner, New Zealand’s Todd Corporation.
The company’s second-biggest shareholder, the Chinese-backed OCJ Investment (Australia) and a retail shareholder named Brendon Dunstan appealed against the plan to the Takeovers Panel last month.
And this week, the parties got their answer, with the panel declaring “unacceptable circumstances” in the proposed de-listing which involved an on-market buyback funded by a loan from Todd, which would have to be repaid later via a rights issue to shareholders.
Of particular concern to the panel was that de-listing process prescribed by Flinders was likely to coerce minority shareholders to sell their shares in a market that would not be sufficiently efficient, competitive and informed.
It found shareholders had not been afforded the time or given the information to assess the merits of the buyback, thereby potentially missing out on the benefits accruing to those who bought or retained their shares.
The panel doesn’t say it explicitly but it essentially found the de-listing process initiated by Flinders was unfair by design.
It took Flinders only three days to return with a proposal, which was considerably more equitable to minority shareholders and consequently accepted by the panel. But the Flinders story still has some way to play out. Despite its revised undertakings, the company has appealed against the original panel finding.
And OCJ and Mr Dunstan can still appeal against the revised and accepted plan.
As one Flinders shareholder put it: A battle has been won but the war is far from over.
