A positive tax ruling by Revenue Canada is allowing Noranda (NOR-T) to complete the divestment of its forestry and energy assets.
Last year, Noranda changed its strategy by deciding to focus solely on its mining and metals assets. As a result, during the first quarter of 1998, the company was able to dispose of its 49% interest in oil and gas producer Norcen Energy Resources. With this new ruling, Noranda will be able to distribute to its shareholders shares in two subsidiaries: 66%-owned Noranda Forest (NF-T) and the wholly owned oil and gas company Canadian Hunter Exploration.
“This brings to a culmination our restructuring, and we expect this to have a very positive impact on our ability to generate positive returns for our shareholders,” said Martin Schady, Noranda’s chief financial officer, during a conference call.
Under the distribution plan, Noranda shareholders will receive 43.6 Noranda Forest shares and 25 Canadian Hunter shares for every 100 Noranda shares. The new arrangement will take effect Dec. 31, 1998, pending approval of the plan by Noranda and Noranda Forest shareholders at meetings scheduled to be held Dec. 3.
The distribution will take place on a tax-deferred basis for shareholders who live in Canada and hold their shares as capital property. As well, Noranda will not be paying cash taxes as a result of the transaction.
Toronto-based conglomerate EdperBrascan (EBC-T), which owns 40% of Noranda, will end up owning 31% of Noranda Forest and 40% of Canadian Hunter, which will become a publicly traded company.
Noranda management is also proposing to its board that Noranda’s annual dividend be reduced to 80 cents from $1 per share in order to reflect the reduction in its asset base and shareholders’ equity as a result of the share distributions. After the distribution, shareholders will receive a dividend directly from Noranda Forest. The Noranda Forest annual dividend has been 40 cents per share since 1991 (equal to 17.44 cents per Noranda share).
As of June 30, 1998, Noranda had 238 million shares outstanding.
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