Fairstar's Golden West hopes plummet

Fairstar Resources' improbable bid for Golden West now looks virtually impossible after ANZ took possession of a 14 per cent stake in its target that Fairstar had bought through Opes Prime. And that will not be good news for its sponsoring broker, the recently floated Findlays Securities.

The Fairstar bid for Golden West, a gold explorer, has been controversial from the start – an audacious attempt to grab control of a much larger entity, and the sometimes mind-boggling machinations at board level and in the strategy room.

The most controversy, however, surrounded the potentially massive transaction costs should the bid succeed. Findlays is working for a paltry base fee of $25,000, but stands to pocket a success fee of $4.8 million if the bid succeeds.

To pay for that, along with $4.3 million in fees to other unidentified advisors and possibly $13 million in state stamp duty, Fairstar planned to raise $25 million in a share placement, which would be underwritten, of course, by Findlays at a very generous fee of 6 per cent.

That windfall was seen as crucial by the Findlays board when it released its half yearly accounts in late February, coincidentally the same day Findlays said it had received an $8 million offer from a newly formed investment bank, Zodiac Capital.

Findlays chairman Ivor Findlay noted in the accounts that corporate advisory income in the December half was down by half to $1.19 million, and it was expecting a "significant” contribution from the Fairstar deal in the second half.

The interim accounts also noted that the deep market falls meant a number of its clients had debts on their trading accounts "significantly higher” than the net assets of the group.

Findlays said at the time it was hopeful the debts would be repaid, but acknowledged the group may need alternative financing if they were not. One source said some debts had been settled, and repayment plans instituted for others.

But nothing has been heard of the Zodiac Capital offer, which was pitched at 11c a share, a share price Findlays has been circling since then. Findlays said on February 29 that it would respond to the offer in due course, but so far has not done so, and no bidder's statement has been made either.