Article In AFR : Taurus, page-5

Taurus forced to keep Finders after landmark Takeovers Panel ruling

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For its sins, Taurus Funds Management has become the first substantial shareholder of an Australian listed company to be held to account for commitments made in a contested takeover. Rob Homer
by Matthew Stevens
Gordon Galt's regrettable history with the new owners of Finders Resources has reached another low with Taurus Fund Management falling foul of a Takeovers Panel ruling that sets a new high-water mark for enforcement of truth in takeovers rules.

For its sins, Taurus has become the first substantial shareholder of an Australian listed company to be held to account for commitments made in a contested takeover.

In response to a complaint brought by the Australian Securities and Investments Commission, the Takeovers Panel has ordered the withdrawal of Taurus' acceptances to a takeover offer for Finders by Eastern Field Developments Limited.


At Eastern Field's urging, ASIC went to the panel seeking a declaration of unacceptable circumstances after Taurus accepted an offer that it had said it would not. That the bidder sought this relief is telling. But more of that later.

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This is not the first time that Gordon Galt has emerged damaged from contact with the owners of Eastern Field.Gillianne Tedder
The panel has also ordered that shareholders who accepted into the Eastern Field offer after Taurus should be given the opportunity to recover their shares.

The result of the orders mean that Eastern Field will return 11.31 per cent of Finders to Taurus and that the acquirer's hold on a further 26.81 per cent of the target will remain subject of some doubt for about a month, given the process designed by the panel.

Taurus' path towards Thursday's humiliation at the panel started with the preparations for a statement that was published by Finders on the ASX platform on December 7 last year. It announced, without caveat, that Taurus would be not accepted into Eastern Field's $177 million offer for the locally listed Indonesian copper miner.

With convolution that stands a classic of its legalistic kind, the Finders statement said: "Taurus has notified Finders that it does not intend to accept the Offer at the Offer Price of $0.23 per Finders share in respect of the Finders shares that Taurus owns or controls, on the basis that Taurus considers that the Offer Price does not reflect the fair value of Finders shares."

Caveat concerns

Now, as it turned out, the Taurus notification that was subsequently echoed to the market originally included a get out: "Taurus confirms that it will notify Finders as soon as reasonably practicable if Taurus' intention with respect to accepting the Offer changes."

But, for reasons that apparently did not interest the panel, that line was missing from the ASX announcement. What concerned the Panel was that Taurus was offered the opportunity to review the statement before it was lodged with the ASX and, while it made changes elsewhere, it didn't restore the critical caveat.

Then, having approved the unqualified statement of its intent, Taurus thrice missed an opportunity to inform the market that it had retained the right to change its decision.

In the days immediately after the edited Taurus commitment was made public, Euroz Securities gathered similar letters of support from other substantial shareholders of Finders.


Those opportunities arrived on December 12, 13 and 14 as successive Finders statements claimed an ever-growing bank of supporters prepared to declare they would not be accepting the offer. According to the panel, none of those letters carried the Taurus caveat.

After it was approached by ASIC, Finders asked Euroz for clarification of the process by which these letters and the publication consents were gathered.

"Euroz subsequently advised Finders … that Euroz did not inform these shareholders that ASIC Regulatory Guide 25 – Takeovers: false and misleading statements … may apply to these statements," the panel reported on Thursday.

As we noted, the results of Euroz's shareholder prospecting were taken to the market over three days. And by December 15 Finders was claiming that shareholders owning a total of 38.21 per cent of the register had told the company 23¢ a share was not enough and that they would not be accepting the bid.


Tactical adjustments
In each of the progressive announcements, Finders included Taurus among the refusniks.

Meanwhile, whether shaped by this wedge of resistance or not, Eastern Field began making slightly surprising tactical adjustments to its offer from December 12. At the same time first notice of the Euroz bloc was offered to the market Eastern Field dropped its minimum acceptance condition, which had stood at the traditional 50.01 per cent threshold of control.

This was surprisingly only because Eastern Field had earned acceptances totalling 19.84 per cent of its target.


The terms of the offer were tweaked twice more before Eastern Field finally stored the Finders parapets.

On February 14 the bid was made unconditional, a decision that, once again was made a wee bit unusual by the fact that it spoke for just slightly less than 25 per cent of its quarry.

Then, on March 12, while in control of about 34 per cent of Finders, Eastern Field went final on its price. By week's end acceptances had run up to 48.40 per cent and control was within reach.

At that point Taurus exercised the wiggle room that the rest of the market did not know existed and it accepted into the offer. With that the Finder's board, whose number included Galt, advised that independent directors continued to believe the bid did not represent fair value. But, "in light of … developments" the board now recommended haste in accepting the offer "to avoid the risks of being left a minority shareholder in Finders when it is controlled by Eastern Field".

Shareholders were also told that independent directors intended to accept the offer. As it turns out, one already had.

The way the panel called all of this, from December 7 until March 19, the market "could reasonably assume" that Taurus would not accept the bid as, as a result, the "acquisitions of control of Finders … did not take place in an efficient, competitive and informed market".

Taurus has until stumps on Friday to ask for a review of the panel's decision and orders. But as things stand, Eastern Field's hold on Finders has been trimmed from 94 per cent to 82 per cent and there is a faint possibility it could lose more.

Grand plans

Now, while Eastern Field might not welcome these last-minute complications, neither will it be excessively concerned should Thursday's decision stand.

In the end, the plan here was to take control and profoundly reshape management to drive better mine performance. But the plan was also to keep Finders listed. Earning 100 per cent of the business was never seriously contemplated. And once the Euroz bloc made it plain that they would not accept, that looked an unlikely outcome.

And what about Taurus? Well, outside of the unwelcome humiliation of being a precedent setter, it has been left welded to the Finders register because panel orders prevent it from selling out at the bid price or less. So it is exactly where independent directors (including Galt) warned shareholders they did not want to be.

As was called out in the introduction, this is not the first time that Galt and Taurus have emerged damaged from contact with the owners of Eastern Field. It is owned in equal shares by Provident Capital, Saratoga Investama Sedaya and a listed subsidiary that is partially owned by both of them, Merdeka Copper. Saratoga is a diversified investment company controlled by the family of an Indonesian billionaire named Edwin Soeryadjaya. One of the principals of Provident is a Western Australian named Gavin Caudle. And as well as boasting them as shareholders, a goodly portion of Merdeka is owned by another billionaire named Garibaldi "Boy" Thohir.

Now, Merdeka's prize asset is a copper and gold project called Tujah Bukit. As it turns out, it was actually discovered by a little Australian miner called Intrepid. And right up until 2012, Intrepid had plans to transform its find into a $5 billion mine. But then along came Team Soeryadjaya, who exercised the leverage of powerful local connection and some arguably sloppy process by Intrepid management to extract the East Javanese jewel for themselves.

So how is Galt connected to all of that? Well, Taurus was the biggest shareholder in Intrepid and Galt helped lead the losing fight against what was an extraordinary piece of claim jumping.