In effect, it has placed the equivalent of its market capitalisation. Its ability to do that flows from a change last year to the Australian Stock Exchange listing rules relating to placements. Until last July, placements were limited to 10 per cent of capital unless they had prior shareholder approval or were being made directly to the shareholders in a target company under a takeover bid. The rule complicated capital raisings associated with takeovers, particularly hostile takeovers. Scrip offers leave the offeror vulnerable to litigation and, more importantly, are disliked by target-company shareholders.
Cash is cleaner and simpler.
Last year, the ASX amended the rule so that there was no restriction on placements associated with the funding of takeovers. That made it possible to place equity with third parties in advance of an offer in order to fund a cash bid. Cash bids, given the expensive nature of the sharemarket at present, have been hard to justify. Raising equity at high prices in the same market as the bid is being launched takes the inflated state of the market out of the bid equation. The structure and philosophy of the bid for Aberfoyle has the fingerprints of Western Metals' adviser, Macquarie Bank, all over it.