In the midst of trying to raise a hefty stack of cash to complete its planned acquisition of
The plan has been approved by regulators but still requires shareholder ratification. OntZinc says the plan is designed to give the company’s board of directors and shareholders adequate time to evaluate a takeover bid or pursue alternatives. The company says it is not currently aware of any pending bids.
Under the plan, OntZinc would issue one right for each of its 237.6 million outstanding shares. If shareholders are faced with a hostile bid, the rights would allow them to buy additional shares at a substantial discount to the going market price, thereby flooding the market and making a buyout prohibitively expensive.
The plan would be triggered by a non-permitted offer for at least 20% of the company’s shares. A permitted bid would need to be made via a takeover circular and remain open for at least 60 days.
In early October, OntZinc came out on top of an auction for Hudson Bay Mining & Smelting with a bid of $325 million. Hudson Bay produces copper, zinc, and byproduct metals at its smelter in Flin Flon, Man., and its mines in northern Manitoba and Saskatchewan.
The deal hinges on OntZinc’s ability to raise the necessary funds. OntZinc has a market capitalization of around $33 million, and, at the end of June, had $3.1 million in cash. The company plans to finance the ambitious acquisition via an equity offering and debt financing. The deal is expected to close near the end of 2004.
The plan will be put to shareholders at a meeting scheduled for May 9; shareholders will also be asked to approve a planned 1-for-40 share consolidation, a name-change to Hudbay Minerals, additions to the board, a restatement of financial statements, and a reduction of the company’s stated capital.
The proposed financial restatements for the first halves of 2003 and 2004 relate to some asset retirement obligations and an income tax recovery associated with the renunciation of tax benefits from the issuance of flow-through shares in December 2003. In the end, the changes increase the company’s loss during the first six months of 2003 by $144,000, to $581,000, and lower the loss for the 2004 first half by $376,000, to around $2.9 million.
The company will also ask shareholders to approve a reduction in the shareholders’ equity account by up to $22 million, to around $2.9 million.
Norman Anderson, James Ashcroft, Ian Conn and Peter Jones have been asked to join OntZinc’s board following the acquisition of HudBay.
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