Falcombridge offers dividend in issuer bid

At presstime for this issue, Falconbridge Ltd.(TSE) Chairman William James told The Northern Miner he was confident the company would get a quick ruling from the Ontario Securities Commission on a Falconbridge proposal to itself buy the 24.7% control block in Falconbridge held by Placer Dome Inc. (TSE). An OSC hearing was due to be held at 9.30 a.m., Thursday, June 23, he said, adding he anticipated an early decision.

The block, worth over $570 million at current market prices, was put up by for sale by Placer Dome last May, and the company since declared a deadline for bids of June 23, with the sale expected to be made after July 18.

In a press release, James said “I think we should have the same right to buy the block as the next guy does, but we can’t do it unless the OSC allows it.”

It’s an unusual necessity and comes up because Falconbridge would be buying only the interest held by the controlling shareholder, whereas a normal issuer bid is made to all shareholders equally.

James characterized the OSC application as a request for an opportunity to enhance value for all Falconbridge shareholders, adding the company needed a level playing field in order to do so.

Analyst John Lydall, of First Marathon Securities, said he believed the Falconbridge proposal would get an okay from the OSC. “It should go down very well.” he said.

Lydall said though, that the proposal has a pre-emptive aspect, which would make it much more difficult for outside bidders on the Placer Dome block.

“It ups the ante for other bidders,” he said, “and would preclude anyone else from making a bid just for the 24.7% block. I wouldn’t be surprised in fact if there are no other bidders.”

Contacted at his Toronto office, Fraser Fell, chairman of Placer Dome would say only that any outside bids would be received on June 23, the deadline date. Among those rumored interested have been Noranda Inc. (TSE), Teck Corp. (TSE), and Metallgesellschaft AG of West Germany.

Placer Dome’s direct interest in Falconbridge is comprised of 6,363,500 common shares, $135,382,000 principal amount of convertible debentures convertible into 6,167,744 common shares, and 750,000 warrants exercisable to acquire 750,000 common shares.

Placer also holds 52.9% of the 3,669,599 outstanding shares of McIntyre Mines (TSE), and McIntyre in turn owns 9,242,070 shares or about 11.5% of Falconbridge’s issued common shares.

In general terms, the Falconbridge proposal involves payment of a special cash dividend to all shareholders, purchase of the shares and warrants owned by Placer Dome, and acquisition of McIntyre Mines from Placer Dome.

Following the transaction, Falconbridge says, it will propose a reorganization of McIntyre and a further non-cash dividend or distribution to all shareholders, other than Placer Dome.

James said final terms of the proposal had not yet been approved. “I don’t know what anybody else is going to bid, and I don’t think they should know what we propose to do,” he said.

Before submitting a proposal to Placer Dome, Falconbridge will obtain an opinion from Merrill Lynch Canada that the proposal is fair to Falconbridge minority shareholders and provides them with value equal to that being paid to Placer Dome.