Noranda Inc. waited until the last moment before deciding to exercis e its right to complete its purchase of about 6.5 million shares of Canada Development Corp. from the federal government.
“It wasn’t an easy decision,” says Bruce Bone, vice-president and associate treasurer for Noranda.
Indeed. Noranda bought the shares for $74 million, about twice the current market value. But the company had backed itself into a corner due to the nature of the deal.
In late Aug. 1985, the federal government announced it was selling the shares in the petrochemical and oil and gas company. The stock price then was about $11.50, and the deal was structured so that two instalments would be required to buy the shares. Noranda, and other investors, paid $5.75 back then and received a receipt giving them the right to make a second payment of $5.75 Sept 16, 1986, in order to receive their common shares.
Since then the price of CDC tumbled to its current market value of about $5.88. Still, Noranda went ahead and completed the purchase waiting until just before 5 p.m. on Sept 16 to make its decision known.
“We believe that barring a total collapse in oil and gas prices there is still good value there,” says Mr Bone.
The purchase will give Noranda about 10% of the votes in the company and about 17.5% of the common shares. The federal government, through the Canada Development Investment Corp., held about 49% of CDC’s stock prior to the sale but its final interest will not be known until after it is determined how many investors exercised their right to pay the second instalment. That should be by about Sept 24.
CDC holds an 18% interest in Falconbridge, a 100% interest in petrochemical company Polysar, a 95% interest in Canterra Energy, a 100% interest in high-tech companies Insystec, AES, and Savin, and a 67% interest in CDC Life Sciences.
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