Date: March 9, 2023
SIAS is pleased to update that Mr Mark Zhou, Executive Director of Golden Energy and Resources Limited (GEAR), and senior management of the Company have reached out to SIAS to update and clarify matters relating to GEAR’s recently announced proposed transactions.
GEAR representatives met me on 6 March, 2023 (Monday), in response to SIAS’ letter of 28 February 2023 to GEAR’s Board, regarding the fairness of the Exit Offer. The proposed transactions have garnered media speculation in Singapore and Australia.
At the meeting, GEAR officials outlined the challenges it faces including limited financing options due to continued pressures related to environment, sustainability and governance (ESG), and also explained the rationale for the structure of the proposed transactions.
GEAR also talked about the conditions that must be satisfied before the proposed transactions can be tabled by GEAR to its independent shareholders, to vote on the distribution-in-specie (DIS) and Delisting, before the Exit Offer comes live.
These conditions, according to them, include regulatory approvals in Indonesia and Singapore, and approval of independent shareholders of PT Dian Swastatika Sentosa Tbk (DSS), the majority shareholder of GEAR that is listed on the Indonesian Stock Exchange. Further, the final total cash consideration for the proposed transactions has to be assessed beforehand by the Independent Financial Adviser (IFA) to be fair and reasonable.
Following the meeting, SIAS notes GEAR’s commitment to provide all relevant information, including through SIAS’ channels, for shareholders to make an informed decision.
SIAS made it clear to GEAR officials on the following concerns of shareholders of GEAR:
1. On GEAR trying to satisfy the prerequisite conditions:
The fact that they have to go through their due process to seek approval on the conditions has nothing to do with the settlement of the fair and reasonable price. According to shareholders, GEAR could still reconsider the price as even if the conditions are approved, shareholders still could reject the offer if the current price is the one that is still offered. GEAR officials still maintained that if the conditions do not go through, there is no point in discussing the offer price now.
2. GEAR had a fantastic FY2022:
SIAS further informed that the group generated US$1.73 billion positive cash flow from operating activities and has close to US$1 billion in cash as at 31 Dec 2022 but the company did not declare any dividends. The GEAR officials maintained that they needed to keep their funds for commitments such as mergers & acquisitions.
3. Only Cash option is preferred
SIAS informed that for most Singapore shareholders of GEAR, only the cash option is viable. The script option for Indon-listed shares (GEMS) is not feasible as the transaction costs are prohibitively high.
4. Manage the 2 different transactions independently
It was put to the GEAR officials that the proposal to distribute GEMS should not be conflated with the privatisation of GEAR. These are two different transactions and the board should manage the two processes independently.
5. Stake in Stanmore is undervalued
The shareholders strongly maintain that the current offer (16cts) is too low because it significantly undervalues GEAR’s stake in Stanmore (Australian listed). The exit offer, minority shareholders feel, must be raised considerably to have any chance of convincing them to accept the offer.
The GEAR officials were informed that shareholders feel that if GEAR is serious about the privatisation, it would be beneficial to the offeror to raise its exit offer (from 16cts) to something substantial and allow it to carry on with its strategic reorganisation.
To move forward, GEAR board and senior management should meet with their shareholders in a Dialogue session to be organised by SIAS as soon as the circular is out, to give the shareholders the opportunity to pose questions to help them make an informed decision. It will also give the board and the senior management of GEAR to clearly explain the reasons for their offer. When the circular and IFA letter are despatched, shareholders will have more information to consider also the merits and assess their various options.
GEAR officials maintained that its professional advisers should be given time to follow the due legal process so that the proposed transactions can be sufficiently certain.
SIAS looks forward to greater openness and communication between GEAR and shareholders to ensure transparency and trust.
President and CEO