Faced with a revised takeover bid by the Sherritt Coal Partnership II, Calgary-based
Fording’s directors intend to review the new offer once they receive the partnership’s information circular. Thereafter, they will issue guidance to its shareholders.
By presstime, Fording had yet to receive a formal offer.
“We don’t have a formal offer from Sherritt,” says Fording Chairman Richard Haskayne. “We have only the information in the announcement, which leaves a number of important questions unanswered. For example, it specifies the cash component of the offer, but leaves out important details about the value of the assets Sherritt is contributing and the value of the assets it proposes to take away from the income trust component.”
The partners responded by setting up toll-free information lines for Fording shareholders.
The Sherritt Partnership, an alliance of
The partnership proposes to combine certain of Luscar Energy’s metallurgical coal assets and port facilities with Fording’s metallurgical coal and industrial mineral assets. The new entity, Canadian Coal Trust, would be Canada’s largest producer of metallurgical coal.
Luscar is a joint venture between Sherritt, the Ontario Teachers’ Pension Plan, and
Sherritt Chairman Ian Delaney says his group’s revised offer is “clearly superior to the Fording plan of arrangement.”
The partnership says that under its plan it will cap the trust’s management costs at Fording’s 2002 levels and that independent trustees would govern the new trust.
Although the partnership is offering shareholders a dollar more per share than under the Fording-Teck plan, the deal would have to absorb a $51-million breakup fee payable to
The partnership also warns that, under the Fording-Teck plan, the trust is subject to significant dilution should Teck Cominco decide to convert its stake into units. Sherritt says its plan has no such feature.
The Sherritt Partnership’s new offer came after the Dec. 4 tabling of a plan involving Fording, Teck Cominco and Westshore. That plan offers Fording shareholders $34 or one new income trust unit (or a combination of each) for each Fording share tendered.
The new Fording Coal Partnership, owned 62% by the Fording trust and 38% by Teck, would have Fording’s coal assets and Teck’s Elkview mine, in British Columbia. Teck’s Bullmoose mine, in the same province and soon to close, is excluded.
Looking to trip up Fording’s 3-way deal, the Sherritt Partnership has distributed a dissident circular touting its own offer and soliciting votes against the Fording-Teck conversion plan. Sherritt needs to convince more than a third of Fording’s shareholders to reject their company’s plan.
Fording’s board is urging shareholders not to send their proxy votes to the partnership, warning that doing so would “end a process that has already created substantial shareholder value.”
Says Haskayne: “If Sherritt holds sufficient proxies, it will vote them for its own interest over that of shareholders.
“It is not possible for Sherritt to act in the best interests of Fording shareholders at the special meeting while it is also trying to buy their shares at the lowest possible price.”
If all of Fording’s shareholders elect to take cash for their shares under the Sherritt Partnership’s offer, each will be limited to $17.63 plus 0.496 of an exchange right for each of their shares. By comparison, the cash limit under the Fording-Teck plan is $15.60 plus 0.541 of a unit per share.
Both offers also include an estimated cash distribution of $1.05 per unit during the first quarter of 2003, plus “synergies” in the neighbourhood of $50 million. Under the Sherritt plan, the partnership’s share of quarterly cash distribution is subordinated. Therefore, the $1.05 payout to unit holders is guaranteed, to a maximum subordination of $11.25 million per quarter.
The new Sherritt offer runs through to Jan. 6. U.S. regulators have approved the bid (Fording has two mining units south of the border).
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