Delaware falls to Colossus

It almost seemed too easy and there wasn’t even a White Knight around to come to the rescue. Delaware Resource Corp. (VSE) has, as expected, fallen prey to Prime Capital affiliate, Colossus Resources Equities (VSE), and presumably could end up as part of International Corona in the future.

Under its tender offer, Colossus picked up 2,387,832 shares and one million share purchase warrants of Delaware, representing 46.5% of its issued capital. In consideration for the shares, Colossus has issued 5,525,664 common shares and 4,775,664 Series A share purchase warrants, each to purchase one common share of the company at $4 by April 15, 1989, and 3,387,832 Series B shares purchase warrants, each to purchase one common share of the company at $4.50 each by April 15, 1990.

In a recent news release, Colossus confirmed that Murray Pezim, John Ivany and Lawrence Page will sit on the Delaware board which is to be reconstituted at five directors. But according to Lawrence Nagy, a vice-president and director at Delaware, Colossus will only get majority board representation when it has 51%. “We want to make darn good and sure that they exercise those million warrants at $7,” he said, adding: “The $7 million will come into the treasury and that money by agreement will go towards development of the SNIP. Then, when they get their 51%, they get their third board member.”

Nagy did not tender any of his shares and Delaware President Ron Netolitzky only tendered about 5.5% of his position. On a fully diluted basis Colossus picked up about 28% of Delaware from Ned Goodman’s DCC Equities; indeed, Nagy argued the offer was directed specifically at DCC Equities which managed to pull the Delaware shareholding out of Toronto-based Western Goldfields before it was taken over by Western Mining of Australia.

Cominco, Delaware’s joint venture partner in the SNIP gold project, was suggested as a possible suitor but the takeover didn’t make sense from a tax point of view, it is rumored. Vancouver-based Teck Corp., which has grown to what it is today through various mergers, also stayed on the sidelines — possibly for good reason. Teck President Norman Keevil Jr, who is also chairman of Cominco, is on Prime Capital’s board, something chess players might describe as a form of checkmate.