Dickenson and Wharf merger called off

Recent changes in stock market conditions have scuttled the proposed merger between Toronto- based Dickenson Mines (TSE) and Wharf Resources (TSE).

Although the directors of the two companies continue to believe a merger will be reconsidered in the future, the amalgamation arrangement announced last July has been officially called off.

The directors said that due to recent changes in market conditions, they decided not to proceed with the proposed amalgamation, under which the shares of Dickenson and Wharf were to be exchanged for shares in a new company.

Barry Fisher, secretary for Dickenson Mines, said in an interview with The Northern Miner that a recent reversal in the share price ratio of the two companies was the main reason for calling off the deal.

The merger, negotiated earlier this year with the help of an independent committee, called for Wharf shareholders to receive 0.9 shares of an amalgamated company which would be called Dickenson Mines Ltd.

Based on market conditions at that time, the share price ratio of the two companies was around 0.83, so the agreed upon exchange ratio of 0.9 gave Wharf a slight advantage. Recently, however the situation has been reversed with shares of Dickenson trading lower than those of Wharf.

“It would be difficult to tell Wharf shareholders now that they are going to get 0.9 shares in a new amalgamated company when the current market is reflecting a share exchange ratio in the 1.1 range,” Fisher said.

During the considerable time taken by the Securities and Exchange Commission to review the proposed merger, information concerning the fundamentals of the two companies has not been available to the market. Details of the merger contained in the proxy document were to be mailed to shareholders pending completion of the review by the US Securities and Exchange Commission.

Fisher cited several market factors that have contributed to recent changes in the Wharf/Dickenson share price ratio.

“There has been a downward pressure on Dickenson’s shares recently because some institutional investors have been selling to buy gold stocks with greater liquidity. Dickenson has also been hurt more than Wharf by lower gold prices since it is a higher cost producer. All this has occurred amid speculation that Wharf is a takeover candidate, which has put additional upward pressure on Wharf’s shares,” he said.

The directors of the two boards continue to believe that the proposal to create one of North America’s larger gold producers is sound and of benefit to both Dickenson and Wharf shareholders.

In the months ahead, Fisher said, Dickenson will be telling its story to investors and the proposal will likely be reconsidered again.