Ashton Board Agrees to New Merger Plan

A proposal from Stornoway Diamond (SWY-T, SWYDF-O) to merge Ashton Mining of Canada (ACA-T, AMCFF-O) into one of its wholly owned subsidiaries has met the Ashton board’s approval.

The move would allow Stornoway to complete a takeover it started in July, which ultimately gave it a 75.6% interest in Ashton. It appointed its own nominees to the Ashton board in November.

The proposal would give holdout Ashton shareholders the same consideration they would have received under the takeover bid, either one Stornoway share and 1, or $1.25 in cash. The cash part of the bid is limited to $13.6 million, and shareholders tendering for cash would receive shares pro-rated to their holding.

Independent directors of Ashton (including David Watkins and Bernard Coulombe, who remained when Stornoway replaced Ashton management on the board of directors) retained legal counsel and engaged Sprott Securities for a valuation. Sprott’s conclusion was that Ashton was worth between 91 and $1.35 per share.

The proposal is an amalgamation, rather than a buyout, so Stornoway has asserted that it can vote its shares in favour of the proposal. A shareholder vote on the matter would need two-thirds of shares in favour for the proposal to go ahead, a requirement Stornoway can meet on its own.

In related developments, Stornoway announced it was moving to a compulsory acquisition of Contact Diamond (CO-T, CONPF-O), and Ashton president Robert Boyd tendered his resignation.

Stornoway owns a 93.1% interest in Contact through a friendly takeover bid launched at the same time as its Ashton bid. Remaining Contact shareholders will receive Stornoway shares in the same ratio as the original bid, 0.36 Stornoway for one Contact.

Boyd, who had stayed on to ensure a smooth transition of Ashton management, has been replaced for an interim period by Contact president Matthew Manson, who will remain until Ashton has been merged into the Stornoway subsidiary.