When FLSmidth entered into a “process” agreement to buy mineral processing equipment maker Ludowici for $7.20 – adjusted for any dividends or distributions paid – in January it seemed a done deal. Now it appears the Danish company may have to pay compensation to Ludowici shareholders.
Things had been travelling nicely until Weir Group pounced on February 10 with a $7.92 a share offer with a similar adjustment to the FLSmidth deal.
FLSmidth fired back with an $11 a share offer on February 16 – also bearing the dividend and distribution adjustment.
However, Weir Group argued that FLSmidth had said, in a Reuters article on January 23, that its $7.20 bid was its final offer. It said FLSmidth should not be allowed to raise its offer beyond $7.20.
That argument was referred to the Takeovers Panel, which yesterday made a series of orders, not least of these being that affected Ludowici shareholders could be entitled to compensation.
The panel ordered that FLSmidth must, within 15 days, appoint an arbitrator who “must be a retired justice of the Federal Court or a state Supreme Court, to assess claims made under these orders”
It said an affected shareholder would be entitled to compensation if they could prove to the arbitrator that they had disposed of Ludowici shares during the period between when the Reuters article appeared and January 31 when FLSmidth issued a “correction”
They also have to be able to prove to the arbitrator that they, or a market participant who advised them, knew of the Reuters article when they sold their shares. They also have to show that they relied on the article either fully or in part to make their decision to sell.
Of course they also will have to show that some compensation is payable.
Should they meet these criteria the arbitrator gets to calculate the amount of compensation based on the Ludowici share price at the time of the sale, the price obtained by the affected shareholder and the likelihood the shareholder would have sold regardless of the Reuters article.
If the arbitrator decides compensation is payable then FLSmidth has 10 business days to pay.
The arbitrator has one month to make a decision from the time FLSmidth receives a claim form from an affected shareholder.
This has not stopped FLSmidth going ahead with its plan. While the Takeovers Panel has raised the possibility of compensation it also has cleared the way for the FLSmidth takeover to proceed.
Whichever way it turns out it seems another great Australian minerals equipment supplier will disappear into a bigger overseas player.
This article first appeared in ILN's sister publication Miningnew.Net.
