Bolivar shareholders bury Scion (January 12, 2006)

Despite a fight to the bitter end it looks as though Scion Capital has lost in its attempt to thwart Gold Fields (GFI-N) acquisition of Bolivar Gold (BGC-T).

The atmosphere inside the auditorium at the Toronto Stock Exchange was tense before voting results were announced.

California-based Scion, and its representatives — huddled three rows back from Bolivar’s management — sent a series of dissenting salvos Bolivar’s way, culminating in a motion to dismiss Bolivar’s chairman and chief executive Serafino Iacono, from chairing the meeting.

The motion was put down, eventually allowing Bolivar’s corporate secretary and legal counsel, Peter Volk, to announce shareholders had given the deal a 76.6% approval.

Shortly after Iacono pronounced the meeting adjourned Bolivar’s management team was all smiles, while the Scion team left the room quietly.

The state of Scion’s recently announced legal challenge was not immediately clear. Scion contends that votes associated with Gold Fields recent acquisition of 5.2 million shares should count as a take-over manoeuvre on the part of Gold Fields – thus subjecting them to stricter guidelines. Scion wanted votes associated with those shares not to count.

Legal proceedings with the Ontario Superior court and the Supreme court of Yukon over the matter were put on hold until the results of the vote were known.

With early indicators pointing to the deal having more than the two-thirds needed for approval without the disputed votes, Scion’s legal position doesn’t appear to be strong.

After the meeting Scion’s chief legal officer, Steve Druskin, conceded that Scion would stop its court action if the approval was strong enough without Gold Fields disputed ballots.

“If the percentage is wide enough and the issue is moot,” Druskin said, “then the court proceeding will not continue.”

Despite Scion’s president, Michael Burry, labeling yesterdays 6.7% increased offer from Gold Fields an “insult,” Druskin was quick to credit Scion for wringing more money out of Gold Fields.

“We’re thrilled to achieve getting 30 million more for security holders,” Druskin said. “We were able to improve this offer. We’re disappointed in that we still see the asset as undervaluedbut everybody did better than they were going to do two days agoWe couldn’t be happier.”

On Jan. 11, Gold Fields announced it had increased its offer to US$360 from US$330 million or to $3.20 a share from $3.00 a share.

But Bolivar’s chairman and chief executive Serafino Iacono wasn’t about to forget Scion’s scathing critiques over the last month. Scion’s barrage against the deal included, amongst other things, the assertion that Bolivar’s management was serving its own personal interests ahead of shareholders.

“They said it was a miserable offer,” Iacono said. “If they want to take the credit (for the increased offer), I think that’s fantastic. They can take it. If they want to take the credit then they shouldn’t go to court.”

For Iacono the shareholder approval spoke louder than any rebuttal Bolivar could have offered over the last month. The company did not fire back at Scion despite its string of riling criticisms.

“Have you heard any words from us?” Iacono asked rhetorically. “A one sided fight is shadow boxing. We don’t want to fight with our shareholders. If the shareholders would’ve said no to this deal, our lives as management would’ve gone back.”

Scion wasn’t able to make that happen, and ultimately, Iacono pointed out, it wasn’t able to win very many shareholders over to its side.

“Today the market spoke,” Iacono said. “It’s a fair offer. It’s more than faironly three million shares outside of Scion said no. Everyone else said yes.”

Scion is the largest holder of Bolivar common shares with roughly 21.5 million shares. In total, around 26 million shares voted against the deal.

Since issuing its dissident circular on Dec. 21 of 2005, Scion consistently labeled the deal a bad one for undervaluing Bolivar’s Choco 10 asset in Venezuela, for overplaying the political risk in Venezuela and for Bolivar management not finding a better offer.

“As we’ve said from the beginning, we believe the process has been wrong and against the best interests of shareholders,” Druskin said.

Iacono rejected the point.

“Our point is that the process is the most important thing, and that we did do due process,” he said.

Iacono said Gold Fields’ offer was the result of an ongoing development.

“Its not that Gold Fields came out of nowhere,” he said, explaining Gold Fields’ board rejected the acquisition plan five or six times. “The thing was rejected for many reasons. One of the reason was country risk.”

Despite the many travails of the last month, Iacono says he was confident the deal would go through.

“It was difficult,” he said of the time leading up to the vote. “You get ups and downs in everything. But we always knew we had our core support of institutional investors, Canadian investors, and traditional mining investors who do their calculations and know their value.”

“The democratic process spoke overwhelming in favour of this deal being done,” he said. “The deal is done.”