JOHANNESBURG (miningweekly.com) - Aim-listed resources company Kalahari Minerals has announced that the potential merger with Australia-based Extract Resources had been terminated. Kalahari Minerals would now pursue other options to increase on its 39,11% stake in the company.

The decision was made after diversified mining giant Rio Tinto failed to assure Kalahari that it would not increase its shareholding in the combined group for a period of time, after the merger was completed.

Rio Tinto owned a 14,9% interest in Kalahari, and a 10,9% stake in Extract. Upon the merger, Rio would effectively own a 19,8% in the enlarged company, without being subject to the 20% limit under the Australian takeover provisions.

Kalahari stated that its shareholders raised concerns about the potential for Rio to acquire effective control of the merged company, without paying a premium for doing so.

“In addition, a number of those shareholders were concerned that Rio’s material holding in the combined group would give it an unhealthy level of control and/or influence in relation to any future negotiations involving a potential transaction between Rio and the merged company, either at the asset or corporate level,” the company stated.

However, Kalahari noted that it was now apparent that a standstill commitment would not be reached with Rio on terms that would satisfy the concerns of the shareholders. “Kalahari has therefore advised Extract that it does not have the support of its major shareholders to pass the requisite resolution at the planned meeting of Kalahari shareholders, and the restructure will not be able to be implemented.”

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