Bill Beament’s off-market offer at 33¢ per share to Echo Resources’ shareholders is reminiscent of the failed $150 million bid of Northern Star Resources (ASX: NST) to take over 49% of Tribune Resources (ASX: TBR) and Rand Training’s (ASX: RND) stake in East Kundana Joint Venture. Both are opportunistic offers.
Shareholders and market observers believe that Beament’s goal is to buy assets as cheap as possible. The offer undervalues Victor Rajasooriar and Dr Alistair Cowden’s Echo Resources (ASX: EAR). It unsettles shareholders.
NST and EAR collusion
The Bid Implementation Agreement (BIA) between NST and Echo may have been set up for some months prior. Shareholders suspect some kind of collusion between NST and Echo.
According to shareholders, Beament’s offer is a walkover, not a takeover. NST is on its way to acquiring over 70-80% of Echo, and Victor’s gold miner may become a minority holding with Beament’s NST taking full control.
The following are assumptions from shareholders regarding Beament’s low ball offer to Echo:
- Victor Rajasooriar, the Managing Director and CEO of Echo Resources, who has previous relationships with NST directors including Bill Beament, was brought in to plan an eventual takeover at a good price for NST.
- The takeover bid orchestrated by NST, Echo, and some advisors, began 6 months ago, or even longer.
- The release of average drilling results just one day prior to the offer smacked of desperation. They had to execute the plan earlier even before the final drilling results for Golden Fox came in, otherwise, they would have risked letting Echo stay in trading mode and the price would have been 35¢ plus by today.
- Beament’s NST is on its way to securing themselves some ounces through Echo’s Bronzewing and practically a free processing plant.
Investors stitched up by NST and Echo Resources
Short term investors will most likely accept NST’s offer and move on. Long term investors or traders will feel like they are being played for fools. Clever investors will buy and hold until a better offer comes along.
Those who believe that Beament’s offer is a good one have not been around EAR very long. In the last couple of years, Echo has reached around 40¢ for every share.
If the board of directors of NST and Echo, including NST’s Executive Chairman, are fair dinkum and are not self-serving, then they would take notice what other bidders, such as the Chinese, are prepared to shell out for Echo’s shares. Perhaps a bidding war is in order to determine who will make a better offer for Echo’s remaining holding.