Griffin Mining Pulls Plug On Ivernia Offer

In an unexpected move, Griffin Mining (gfmif-o, gfm-l) has withdrawn its unsolicited takeover offer for lead miner Ivernia (IVW-T, IVWFF-O).

In a statement on April 3, Griffin Mining explained that Ivernia’s board had through a note issue, effectively entrenched its largest shareholder and “insider,” Sentient Global Resources Fund, as the controlling shareholder in the company.

The terms of Ivernia’s convertible debt and other related transactions were permitted to proceed on the basis of the Toronto Stock Exchange’s decision to grant an exemption from TSX minority shareholder approval requirements for non-arm’s length transactions and for transactions exceeding specified levels of dilution.

Sentient Global Resources Fund was issued secured convertible notes where the conversion price was cut from US$1.08 per share to 11¢ per share — thereby entitling it to acquire 199.1 million shares, presenting approximately 111% of the current outstanding shares of Ivernia and effective control,” Griffin outlined in a press release.

The term was also extended by four years to 2013; the interest payable increased from 6% to 8% per year; and the notes became due and payable “on any ‘change of control’ of Ivernia.”

In a statement, Griffin noted that actions taken by Ivernia’s board “have resulted in the current and future control of Ivernia being delivered to a related party with latent massive dilution of its share capital without the approval of Ivernia’s shareholders or allowing the shareholders to be given the opportunity to consider a number of alternative proposals put forward by Griffin.”

Griffin added that Ivernia had applied for exemption from shareholder approval requirements on the grounds of “financial hardship,” despite the fact “that Sentient itself was the major creditor of Ivernia imposing the ‘financial hardship;’ [and] that Griffin had advised of its intention to make an offer to purchase all of the outstanding shares of Ivernia at a 25% premium to market and had indicated it would refinance Ivernia on the same basis as Sentient but at a 36.4% premium to the conversion price offered by Sentient in the Notes.”

For its part, Ivernia said that certain statements Griffin has made are “false, incorrect or misleading.”

It points out that Sentient has not become “effectively entrenched” as a controlling shareholder, as Sentient’s fully diluted position was reduced to 38.1% upon the sale of US$5 million of Ivernia’s secured convertible notes to Oppenheimer- Funds Inc. (announced on March 30) and could be further reduced to 34.9% if the company is successful in completing the issue of the remaining US$5 million.

It also notes that Griffin’s statements suggest that Sentient was the only purchaser of the notes when in fact there were two other existing shareholders — Ingalls & Snyder and Oppenheimerfunds — who participated in the refinancing and hold US$11.5 million and US$5 million of notes, respectively.

“Ivernia’s refinancing was approved by a fully independent committee of directors, none of whom, as Griffin implies, are Sentient nominees,” Ivernia argued in a press release on April 7.

Furthermore, the notes were “heavily negotiated” and the conversion feature was above the market price of Ivernia’s shares at the time it was agreed to, the company says.

The Toronto Stock Exchange granted Ivernia’s financial hardship application well before Griffin made its intentions known, Ivernia added. “Statements such as, ‘Griffin had advised of its intention to make an offer to purchase,’ or implications that the TSX approve the application in the face of the Griffin offer are simply untrue.”

Griffin Mining, a Bermuda-based mining and investment company, offered 15¢ per Ivernia share in a deal valued at about US$27 million.

The offer represented a 25% premium over Ivernia’s closing price on March 24, the day prior to the announcement of the bid, and a 27.4% premium over the 20-day average trading price of Ivernia’s shares.

Griffin said at the time that its substantial cash balances and no debt would enable it to bring Ivernia’s idled Magellan mine back into production.

The Magellan lead mine, about 30 km west of Wiluna in Western Australia, will account for about 2% of the world’s lead mine production when it goes back into production, Ivernia says.

In Toronto at presstime Ivernia was trading at 13¢ per share. The company has a 51-week trading range of 4¢-$1.52. In London, Griffin Mining was trading at 21.75 per share.