ENRC stock jumps on Glencore bid talk
Eurasian Natural Resources saw its shares jump 5% this morning following reports yesterday that FTSE newcomer Glencore International is considering a £12bn move for the Kazakh miner.
Having suffered a steady 30% decline this year from the 1,100p level that was precipitated by boardroom instability, ENRC shares this morning lifted 37.5p to 779.5p – a price that values the company at £10bn.
The Sunday Times claimed that Glencore Chief Executive Ivan Glasenberg had held talks in recent weeks with ENRC's three founders and key shareholders Alexander Mashkevitch, Patokh Chodiev and Alijan Ibragimov. The trio control some 45% of ENRC's shares.
ENRC has long been named as a potential target for Glencore, all the more so now that its shares have been hit by the dispute between independent directors against its founders.
Two independent directors have already been ousted by top shareholders and at least one other is considering tendering his resignation, according to reports last week. [ID:nLDE7591M5] [ID:nLDE7580KB]
But one industry source told Reuters it was too early for Glencore, which only listed on the London Stock Exchange three weeks ago, to consider a move on a company as large as ENRC.
It would have had to disclose plans in its listing prospectus and would also struggle to raise money to pay for the deal, as it cannot issue new shares for six months.
'We would see an all-out cash bid near-term from Glencore for ENRC as highly unlikely and the Swiss-based group issuing more equity is not an option for at least six months,' Miriam Hehir, credit research analyst at RBC Capital Markets, told Reuters.
'Glencore highly values its investment grade credit ratings, which help to underpin its profitable Marketing business, and we do not believe it would jeopardise these ratings with an ENRC bid,' she added.
Glencore shares are still trading 'under water', or below their issue price of 530p.
Industry analysts have suggested Glencore could take a stake in ENRC rather than buy the entire company, potentially taking shares currently owned by rival Kazakhmys which has said it is considering all options for its 26% stake.
Shares in Kazakhmys were up 2.2% today at 1,235p. Separately, Kazakhmys announced earlier on Monday that it had agreed a $1.5bn loan from China Development Bank to help develop a large copper deposit in eastern Kazakhstan, a move that will allow it to avoid selling a stake in the project.
Glencore shares were up 0.6% at 512.6p.
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