Phosphate Resources Limited – Panel Accepts Undertakings from Phosphate Resources Limited [03/02/2003] The Takeovers Panel

03 February 2003

PANEL ACCEPTS UNDERTAKINGS FROM
PHOSPHATE RESOURCES LIMITED.

The Panel advises that it has today accepted undertakings from Phosphate Resources Limited (PRL) (an unlisted public company) concerning obtaining shareholder approval for a rights issue, or underwriting by Asset Backed Holdings Limited (ABK), in the next 12 months. On the basis of those undertakings the Panel has decided to decline an application for a declaration of unacceptable circumstances in relation to the affairs of PRL. The application from Mr Gerry Pauley and Dr Gordon Elkington (Shareholders) was received on 2 January 2003.

The application related to a buy-back of 25% of the shares, and a proposed one for three rights issue, by PRL. The buy-back occurred in August 2002. The rights issue was proposed in November 2002, and sought to have issued almost exactly the same number of shares, and to raise almost the same amount of cash as was paid out in the buy-back.

The proposed rights issue was to be underwritten by ABK, which is the largest single shareholder in PRL.

The Shareholders had submitted that as a result of the buy-back ABK's percentage holding in PRL has increased to 26.7%, and as a result of underwriting the rights issue ABK may increase its holding to a maximum of 39.6%, both without the payment of a takeover premium.

In order to satisfy the Panel's concerns, PRL has undertaken to the Panel that, for the next 12 months, it will not:

(a) proceed with a rights issue that could lead to ABK obtaining an increase in its shareholding above that which it would have been entitled to acquire under item 9 of section 611 (the 3% creep provision); or

(b) proceed with an underwriting of any rights issue by ABK,

without, in each case, shareholder approval by ordinary resolution ignoring any votes cast by ABK and its associates, and ABK's directors and their associates.

PRL have also undertaken that if they proceed with a rights issue, PRL shareholders are to be provided with adequate information which at least complies with item 7(b) of section 611 and relevant ASIC policy for the purposes of the shareholder meeting.

PRL will withdraw its Offer Information Statement dated 6 December 2002 regarding the proposed rights issue.

The President of the Panel appointed Marie McDonald, Chris Photakis, and Andrew Knox to be the Sitting Panel to consider the application.

The Panel will draft its reasons for its decision in this matter and post them on the Panel's website at www.takeovers.gov.au.

Nigel Morris,
Director, Takeovers Panel
Level 47 Nauru House,
80 Collins Street,
Melbourne VIC 3000
Ph: +61 3 9655 3501
nigel.morris@takeovers.gov.au