Noranda moves to acquire rest of Brenda Mines and Kerr Addison

Diversified miner Noranda Mines (TSE) revealed plans this week to buy up those shares of Brenda Mines (TSE) and Kerr Addison Mines (TSE) that it does not already own.

Noranda, which owns 52.1% of Kerr Addison, announced its offer in late February. The bid is a share-for-share exchange, which will follow payment an extraordinary dividend of $1.75 per share to shareholders of record at the time of the offer. The value of the bid is about $230 million.

Kerr shares had closed at $25.75, and Noranda shares at $26.88, at the time of the offer.

The offer for Brenda Mines is $21 per share, with a total value near $24 million. Brenda shares shot up $3.75 to $20.38 following the announcement. Noranda already owns 76.5% of Brenda, which had been trading at a substantial discount to its book value.

Independent directors of Kerr and Brenda consulted outside advisors and have offered opinions that the offers are fair to minority shareholders. Management of Kerr Addison had been planning to reorganize the company since about 1992, when it began divesting its operating assets, such as Minnova (now Inmet) and oil and gas explorer Anderson Exploration. It had been generally understood that the reorganization would be a buyout by Noranda, which has held an equity interest in Kerr since the early 1940s.

Noranda’s shareholding in Brenda dates to the development of the Brenda porphyry-copper orebody, just west of Kelowna, B.C., in the late 1960s. Brenda has been winding down its operation since the mine closed in 1990.

Kerr Addison’s principal investment assets are $260 million in interest-bearing instruments and 7.9 million shares (about 4%) of Noranda. It derives some operating revenue from a 9.83% interest in Canadian Electrolytic Zinc, a Noranda subsidiary that operates the Valleyfield zinc plant in Quebec.

The company reported earnings, for 1995, of $20 million (or $1.14 per share) on investment and operating income of $31.8 million. In the previous year, it made $19.1 million ($1.09 per share) on combined income of $26.7 million.

Brenda Mines is settling the engineering details for the rehabilitation of its Brenda mine. Its only other assets are 2 million shares of Noranda Forest, together with its Process Technology division, which provides mill design, equipment sales and maintenance services. Its 1995 earnings were $3.8 million, or 77 cents per share, on revenue of $9 million; in 1994, it lost $2.9 million (59 cents per share) on $13.4 million in revenues.

Noranda announced 1995 earnings of $521 million (or $2.26 per share), up from $330 million (or $1.45 per share) in 1994. Revenue grew to $8.4 billion in 1995 from $6.8 billion the year before. Earnings at the company’s Mining and Metals group almost doubled, to $442 million from the previous year’s $229 million. Stronger pulp, newsprint and paper prices helped the Forest Products group post a significant improvement, and the Oil and Gas group, which lost $25 million in 1994, recorded earnings of $8 million.