Bright Kindle Resources & Investments Inc. (BKR) rose on Monday after the company disclosed fresh details on a P5 billion “reverse takeover” deal between its subsidiary and magnetite iron sand miner Strong Built (Mining) Development Corp.
Controlled by the family of House Speaker Martin Romauldez, BKR shares soared as much as 19 percent to P1.55 each before closing at P1.37 per share or a gain of 5.4 percent.
The company resumed trading at 10:30 a.m. on Monday after a seven-day suspension following the release of additional information.
Benefits unclear
The owners of Strong Built Mining will purchase over 97 percent of BKR’s subsidiary Brightstar Holdings and Development Inc. for P5 billion, a regulatory filing on Monday showed.
This is called a reverse takeover since the deal paves the way for Brightstar to acquire 100 percent of Strong Built Mining in exchange for shares and condominium assets.
It was not immediately clear why Strong Built Mining’s owners are purchasing the unlisted subsidiary of BKR.
Expansion potential
Strong Built Mining holds a mineral production agreement to operate a magnetite iron sand mine covering 7,411 hectares in the Municipalities of Dulag, Mayorga, MacArthur, Javier, and Abuyog, Province of Leyte.
Magnetite sand is a valuable construction resource used in the production of iron, steel, and concrete.
Strong Built Mining currently operates 30 percent of its tenement area, “presenting opportunity for potential growth and available resources for expansion of commercial operations.”
Major dilution
Based on the filing, BKR and its shareholders will be left with 2.97 percent of Brightstar, which will own Strong Built Mining after the deal is completed.
“This transaction will have a negative impact on BKR/Brightstar shareholders because it will result in the dilution of the former’s ownership of [Brightstar], which would now own the mining assets,” Alfred Benjamin R. Garcia, head of research at stockbrokerage house AP Securities Inc., told InsiderPH.
Other synergies
But Garcia said the deal could create possible synergies with listed nickel miner Marcventures Holdings, which is 19 percent-owned by BKR.
“I can imagine that magnetite iron plus nickel would vibe well together and can pave the way for the group’s entry into stainless steel,” he said.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
