MRDC cleared to buy shares

The Independent Consumer and Competition Commission (ICCC) has given clearance to Mineral Resources Development Company and its subsidiaries (MRDC Entities) to acquire additional shares in PNG Air Limited (PNG Air).

The ICCC Commissioner and Chief Executive Officer Paulus Ain said: "PNG Air has commenced a debt restructure exercise with all its shareholders and major creditors to stabilize its financial performance and enable itself to return to profitability levels following the effects of Coronavirus and the subsequent depressed state of the domestic economy."

"The Proposed Acquisition is part of a debt restructure and relates to an agreement between PNG Air and the MRDC Entities who are existing shareholders in PNG Air.

"Under the agreement, the MRDC Entities will provide rescue capital to PNG Air in exchange for additional shares. The additional shares issued to the MRDC Entities will also cover for historical capital contribution payments made by MRDC Entities in the years 2015, 2016 and 2017.

"The historical capital contributions were intended for equity but were never converted to equity through the issue of shares. As such, the current agreement addresses that outstanding commitment for historical capital contributions, as well as new capital contributions.” 

Currently, the MRDC Entities hold 40.2 percent shareholding in PNG Air. Post-acquisition, the MRDC Entities will together have 83.37 percent of PNG Air's issued ordinary shares.

PNG Air primarily operates in the domestic airline industry, providing Regular Passenger Transport (RPT) Services, Charter Services, and Freight Services to customers throughout the country.

"On the other hand, the MRDC Entities serve as corporate trustees for landowners and provincial governments in respective mining and petroleum project areas in PNG. Under the management of MRDC, these corporate trustees have an investment mandate to invest a certain percentage of their trust funds on behalf of the respective landowners and provincial governments for a return," Ain added.

"Based on the available information, the ICCC considers that the MRDC Entities and PING Air are not competitors. The services offered by both businesses do not directly overlap in any domestic market(s). PNG Air operates as an aviation company, whereas the MRDC entities function as corporate trustees or investment vehicles.” 

The ICCC also considered that there is no vertical supply relationship between the MRDC Entities and PNG Air, and as such, the ICCC cleared the proposed acquisition to proceed

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