Captain Matthew Flinders was a late 18th century British Navy captain and one of the greatest explorer navigators of his time. His circumnavigation around the southern continent he called Australia also led to the naming of dozens of places by his name, along with a species of local citrus tree. He spent so much time at sea, and so little at home, he wrote a book about his shipboard companion which he entitled Trim, Being the True Story of a Brave Seafaring Cat.
Understandably, Flinders Mines (FMS) thought their hole in the ground in Western Australia should be named after the captain, though after their six-month brush with the Russians, Trim might have been more apt. Here’s the tale so far.
Victor Rashnikov, owner of Magnitogorsk Metallurgical Combine (MMK), won’t be claiming to own anything with the Flinders name after today’s court hearing in Chelyabinsk. Having concealed his intention towards Flinders Mines from the MMK board, public shareholders, Gazprombank, the Kremlin, and the stock markets of the world, his mutism is shamed by the cat.
Russian business, however, is business, and for all his customary bravado, this is an episode which proves that Rashnikov is far from being the master of his own ship.
In a predictably brief proceeding this morning, Judge Natalia Bulavintseva ruled that she would not hear evidence and argument on the merits of MMK’s takeover of Flinders Mines, as she has previously scheduled for today. Instead, she ruled that she is postponing the next hearing until July 2. At that time, Bulavintseva has also ruled, reversing a decision she issued on May 2, she will close her courtroom, and enable the phantom plaintiff, Elena Egorova, to obtain confidential MMK documents to prove her case that the Flinders Mines deal is a bad one.
The postponement comes two days after the quit-date for MMK to finalise its deal to acquire Flinders Mines. According to their scheme of arrangement, “the quit date for the deal is June 30, 2012. The wording says: “Quit date means 30 June 2012 or such later date as MMK and Flinders may agree in writing.”
It is therefore likely that, without ever exposing a company secret, minute of the board of directors, or indeed anything worth saying, Rashnikov has persuaded the Russian judge to let him exit without even the obligation to pay Flinders Mines a transaction break fee of A$2.5 million. There isn’t a major steelmaker in Russia who doesn’t think Rashnikov has manipulated the entire court case. They differ only on whether Rashnikov was taking orders from the Kremlin.
MMK’s annual general meeting of shareholders will convene tomorrow, May 25, and Rashnikov can be expected to say he cannot comment on the case because it is sub judice. If the audience dared, they would roll their eyes at that one.
The initiative now passes to Flinders Mines in Australia. Its share price was stuck at 16 cents in Australian Stock Exchange trading before the Chelyabinsk court began today. It cannot appeal against a postponement; but its lawyers are due to appear in the appeal court next week in Chelyabinsk to argue against the injunction preventing closure of the MMK acquisition. This is due to be heard on May 30 by Judge Galina Fedina. Bulavintseva may have decided to pass the buck to Fedina; she may decide to pass it back on the ground that until the merits of the case are presented in court, the safest thing is to preserve the injunction.
Both judges may be waiting for decision-making authority over the Russian steel and iron-ore mining sector to pass into new hands. Fedina isn’t likely to favour dropping the injunction on appeal, if Bulavintseva doesn’t dare hear the full case until July 2. The two judges can’t be blamed for their lack of foresight on steel investment and foreign policy issues that properly should be decided in Moscow. Without Igor Sechin in charge of the entire resources sector since the start of this week, the hands on this tiller may be President Vladimir Putin’s; or those of his new chief of staff, Sergei Ivanov; or Prime Minister Dmitry Medvedev, or his factota, Arkady Dvorkovich and Igor Shuvalov.
It may be time for Flinders Mines and its shareholders to decide that they are better off not extending the quit date, and letting MMK go. If the Australians have been telling the truth in the asides they have been slipping to hedge fund investors, there’s a Chinese and a Japanese buyer for their hole in the ground. For the bidding to start on a new acquisition, the MMK deal must be concluded. That is probably what has happened today.
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