UPDATE 2-ENRC board rejects lowball offer from founding trio

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The board of miner ENRC has rejected a $2.4 billion tentative offer from its founding investors and the Kazakh government for the shares they do not already own, giving them two weeks to come up with an improved bid.

 

ENRC's billionaire co-founders, Alexander Machkevitch, Alijan Ibragimov and Pathokh Chodiev, said last month they were weighing up a buyout of the troubled Kazakh miner's minority investors and had the support of the government, which is also a major shareholder.

If they are successful in buying the 46 percent of the company they do not control, the investors would take ENRC private just over five years after it listed, drawing a line under a London adventure that has been marked by bitter boardroom battles, corruption probes and an ill-timed acquisition spree that left it with $5 billion of debt.

ENRC's independent directors said on Friday they had received a letter from the three, the Kazakh government and Kazakhstan's sovereign wealth fund, requesting more time and detailing an unspecified "conditional, indicative proposal".

"We believe the current proposal materially undervalues ENRC, and we will ... seek an improved and formal proposal," the chairman of the independent committee of the board, Mohsen Khalil, said.

The board did not, in its statement, detail the offer, but a source with knowledge of the matter told Reuters a letter received by the board on Thursday had outlined a conditional proposal around, but "not materially below", the current market price of around 270 pence per share. That would value the 46 percent stake, according to Reuters data, at around 1.6 billion pounds ($2.43 billion).

The shares closed on Friday at just under 272 pence.

At those levels, an offer would mark a sharp drop for shareholders who bought into ENRC at its listing or its mid-2008 peak. Since the start of last year alone, the shares have more than halved in value.

SHOWING THEM THE MONEY

The source said the letter also outlined several key elements that still needed to be resolved for the bid to go ahead, including an agreement between the members of the bidding consortium and final financing deals.

Sources with knowledge of the situation told Reuters last month that the co-founders were likely to receive financing support from Russian banks VTB and Sberbank - already ENRC's largest lenders - working alongside adviser Societe Generale. The Kazakh government could also contribute.

The terms of the loans, though, could be onerous, some of the sources said, suggesting the buyers could also seek to sell assets from ENRC's sprawling portfolio after the deal to repay their bank financing and cut group debt.

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The board has agreed to the founders' demand for more time, asking Britain's Takeover Panel, which regulates mergers and acquisitions, to grant them until June 3. The earlier bid deadline was 1600 GMT on May 17.

Key now, however, will be the response of ENRC's largest shareholder, rival miner Kazakhmys, who owns a 26 percent stake. Kazakhmys declined to comment on Friday.

Another unknown is the position of metals tycoon Suleiman Kerimov, who in the past month has built a stake of more than 3 percent in the company - a significant slice of a freefloat that adds up to less than 20 percent.

($1 = 0.6582 British pounds) (Reporting by Clara Ferreira-Marques; Editing by Mark Potter and Elaine Hardcastle)

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