Why I'm voting NO!Why I’m voting NO!
1. This is not an arms length transaction. It is a related party transaction as Pala Investments is the largest shareholder. As currently structured the acquisition offer is not beneficial to minority shareholders and has a bogus valuation.
2. Before the acquisition offer, Anthony Milewski, Chairman and CEO, was noted on KBLT’s website as also being an MD at Pala Investments. Once the acquisition offer was made, this reference was scrubbed from the website. He is clearly conflicted. First, for full transparency, he should disclose his full economic interests in Pala. Second, he should forgo the change of control incentives – totaling almost $10m – as it is a related party acquisition, not a true change of control. If the acquisition does not proceed, Pala receives a $15m termination fee. Again, Milewski should disclose his economic interest in Pala to reflect what would his pro rata share would be.
3. Most of us invested in KBLT as we wanted to make a long term investment in cobalt. In spite of the current low price, the long term demand trend for cobalt is quite strong and KBLT should be richly rewarded when its Voisey Bay cobalt stream starts in 2021. Even if the share price drops if the acquisition offer fails, that’s okay with me as I’m interested in KBLT’s share price 3-5 years out.
4. There is no urgency for KBLT to sell its best assets at the bottom of the market. KBLT has the liquidity to easily ride out the next few years. Why are they selling cheap to Pala now?
5. The valuation of the assets makes no sense. They impute Nickel 28's valuation - Ramu and the remaining assets - as being almost 40% of the acquisition offer or C$2.17/share. Currently, the market price imputes Nickel 28’s value as C$0.29! As such, there is virtually no acquisition premium today.
6. If the acquisition vote fails, I’ll be supportive of replacing Milewski as CEO as he does not represent fairly all shareholders.
7. The fact that ISS, a ‘so-called’ independent proxy advisory firm recommends voting for the Plan is indicative of an extremely superficial assessment and does not at all acknowledge the related party nature of the transaction, with its various conflicts of interest.
8. Finally, I’m pragmatic. If Pala were to make a real offer, with a real premium, I’d be supportive. At a minimum, the cash portion of the offer should be increased at least C$1/share to reflect a lower valuation for the assets of Nickel 28.
Feel free to share my comments with other KBLT shareholders. As currently structured, the acquisition offer is unfair to shareholders.