Granges terminates Goldbelt deal

At current market prices that would cost about $6 million, something the company argues “would significantly reduce Granges’ financial resources, thereby inhibiting Granges’ ability to take advantage of those investment opportunities which it wishes to pursue.”

Under the terms of the merger, shareholders from either company opposing the deal had the right to be bought out at fair market value. However, when the deal was put together last November Granges’ stock was trading above the $4 level and gold prices were considerably higher.

Since then the company’s stock has been battered by falling gold prices and it traded below the $3 level just recently. Not surprisingly, dissident shareholders have also taken a hard look at the proposed private placement of Granges shares with M.I.M Canada at a price of $4.55 per share.

Apparently M.I.M. wasn’t enthused about $6 million of its $50 million private placement going to dissident shareholders and the company actually considered pulling out of the financing. That being the case, Granges would have been forced to make the payment out of its treasury, severely depleting its limited cash reserves.

The merger proposal would have seen Goldbelt shareholders receive one Granges share for four shares of Goldbelt. Both companies have expressed an interest in completing the merger, but it probably would require a revision of the earlier merger proposal and possibly the share exchange ratio.

Granges shareholders will get to vote on the private placement at the company’s annual meeting which was adjourned to June 7. The merger proposal will not be on the agenda.

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