Kazakhstan has launched a process aimed at terminating a merger of Russia's top gold producer, Polyus Gold, and Kazakh gold miner KazakhGold Group Ltd due to what it says is a low price of the deal, a spokesman at Kazakhstan's Ministry for Industry and New Technologies said on Monday.
"The deputy head of the ministry's subsoil department said the country's legal bodies have launched a process aimed at terminating the merger between Russia's Polyus Gold and KazakhGold due to undercharging the deal price and put a lid on KazakhGold Group Ltd's additional share issue," the spokesman said, adding that the ministry could not reveal any other details.
Polyus Gold has not commented on the situation yet.
In December 2008, Polyus Gold estimated KazakhGold controlling stake at $746 million, but the company's capital had considerably fallen, so the companies later agreed on a merger valued at $269 million.
In late June 2010, Kazakhaltyn MMC JSC, a subsidiary of KazakhGold Group Limited belonging to Polyus Gold, and Jenington International Inc., controlled by the Russian company, initiated a trial at the Royal Court of Justice in London against five members of the Asaubayev family, a former core owner of KazakhGold, in relation with a violation of several contract terms and fund embezzlement, which was not passed to the defendants ahead of the Kazakh asset merger.
In early July, KazakhGold and Polyus Gold, which owns 50.1% in KazakhGold via its subsidiary Jenington International Inc, announced a reverse merger, under which KazakhGold would acquire its parent company Polyus Gold. Under the scheme, one share of Polyus Gold will equal 9.26 Global Depositary Receipts of KazakhGold, and one American Depositary Receipt of Polyus Gold will equal 4.885 GDRs of its subsidiary.
The deal is aimed at merging the two companies into one holding, which will be traded on the London Stock Exchange as a single company, while Polyus Gold plans to delist its ADRs from the LSE soon.
The merged company is expected to become one the world's leading gold mining companies, whose shares will trade on the LSE.
Polyus Gold and KazakhGold's 2009 joint gold production is estimated at 1.3 million ounces, while the proven, probable and possible reserves total 74.7 million ounces.
Polyus Gold shareholders are expected to own almost 93.5%, while KazakhGold will acquire only 6.5% in the new company, which will be called Polyus Gold International Limited.
ASTANA, July 12 (RIA Novosti)
