Manalta drops poison pill defence

Luscar again revises bid for country’s largest coal producer Manalta Coal Income Trust has lifted a unit-holders’ rights plan adopted to delay a hostile takeover by Luscar Coal Income Fund after that company again extended its deadline for unit-holder acceptance of the deal.

Manalta dropped the unit-holder rights protection provision (or “poison pill”) days before Luscar was set to challenge the action in a joint hearing of the Alberta and Ontario securities commissions. Manalta says the decision was based on Luscar’s extension of the deal to Sept. 3, which will give holders of Manalta instalment receipts sufficient time to review the proposal and assess alternatives. The rights plan will remain in effect until Sept. 2. The closing date of the $289-million deal, originally scheduled for July 21, has already been extended once.

In addition, Luscar has revised one of its conditions for the takeover, lowering to 50% from 66.6% the number of outstanding Manalta instalment receipts that must be exchanged in order for the deal to go through. George Chapel, president of Manalta, described the move as “coercive,” stating that Luscar seeks to railroad unit-holders into accepting “an undervalued bid.”

Gordon Ulrich, president of Luscar, says unit-holders who reject the deal leave themselves open to a “highly leveraged, high-risk investment,” referring to a $270-million recapitalization scheme the rival coal firm entered into to ease the burden of a $4 instalment payment owed by its receipt-holders on Oct. 1.

Also at issue is Luscar’s access to Manalta’s data room. Manalta proposed a trade between the companies: access to its own data room in exchange for more information about Luscar’s export operations and the recently permitted Cheviot mine in Alberta. As presstime, no deal for an exchange of information had been reached.

The proposed takeover deal is based on 87 million Manalta units, each of which can be exchanged for 0.335 of a Luscar receipt, as well as the payment by Luscar of the final instalment due for Manalta receipts. According to Luscar, the merged company would save $70 million over the first four years.