Northgate prevented by OSC from completing ABM merger

Last week, the Ontario Securities Commission (OSC) stepped in to prevent Northgate from getting shareholder approval for the proposed amalgamation of ABM Gold (AMEX) with three other companies in the Northgate group.

Although shareholders voted in favor of the proposed merger at a special meeting in Toronto, class A and B shares of ABM issued as part of the merger have been prevented temporarily from trading by the OSC.

The temporary cease-trading order relates to the OSC’s objections to a proxy circular issued as part of the merger and opposition from Margaret Witte, former president of Neptune Resources (TSE). Neptune is one of the companies being merged with ABM while the others are United Gold (VSE) and Inca Resources (TSE).

When asked to comment, Witte said a confidentiality agreement signed with Northgate after she stepped down prevents her from commenting on the proposed merger.

However, according to Joseph Groia, the OSC’s director of enforcement, the commission is concerned that the proxy circular doesn’t meet policy statement 1.3 which requires approval of the transaction by a majority of minority Neptune shareholders.

Northgate says the policy statement does not apply to it because the proposed merger was approved by 96% of the total votes and (77% of minority votes) cast by Neptune shareholders.

But Groia says only 24.3 million of Neptune’s 29.17 million outstanding shares were voted at the meeting, leaving five million unrepresented. “We can only speculate on how those shares would have been voted had they been represented,” said Groia.

The OSC has scheduled a hearing to consider disclosure and voting for Nov 23. Meanwhile, “ABM could decide to hold a majority of the minority vote for Neptune shareholders,” Groia said. Or the cease-trading order could sim ply expire.

If the merger proposal gets the approval of Ontario’s Supreme Court of Ontario, it will be on the basis of one ABM Class A common share for every six United shares, or every 15 Inca shares.

Under the planned merger, Neptune shareholders can exchange their single-voting common shares for ABM multiple-voting class B shares and restricted voting class A shares. The ABM class A shares carry one vote per share while the class B shares have 10 votes per share.

Pending shareholder and regulatory approval, Northgate is scheduled to hold 50% of the equity and 81% of the amalgamated company’s voting shares. Chief assets of the company would be the 200,000-oz-per-year Colomac gold pro ject in the Northwest Territories and the California-based Jamestown gold mi ne which produced 60,100 oz in the first six months of 1989.

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