Glamis-Eldorado marriage unlikely

The hostile takeover of Eldorado (TSE) by Glamis Gold (TSE) is on the rocks.

In an eleventh-hour move, Glamis withdrew its application before the Ontario and British Columbia Securities Commissions, requesting a review of Eldorado’s shareholder rights protection plan.

The rights plan, also known as a “poison pill,” would give shareholders the right to purchase an additional share, at half the going market price, in the event a hostile third party acquires more than 20% of the company’s outstanding shares.

Glamis says it withdrew its request because certain shareholders of Eldorado said they wished the rights plan to stay in place.

Hugh Morris, a director of Eldorado, says shareholders owning approximately 10 million of the 22.9 million outstanding shares advised the commission in writing that they would not tender to the Glamis offer.

The offer includes $1.20 in cash plus 0.4 of a common share of Glamis for each common share of Eldorado. The offer is also being made, on the same terms, to the holders of special warrants, which convert into common shares on a 1-for-1 basis, and to holders of the US$10 million in debentures that are convertible into common shares at US$3.25 per share. The offer is not, however, being made to shareholders in the U.S., as the shares are not registered under that country’s Securities Act.

Glamis was expected to have kept its offer open until July 20. But since the offer is contingent on the company’s receipt of at least 75% of the issued shares, Morris sees no chance of it proceeding, given the support demonstrated by Eldorado’s shareholders.

“We are gratified [by] the support of shareholders and [by] their endorsement of the board of director’s view that the offer was inadequate,” says Morris.

He adds that shareholders appear to very supportive of the company’s efforts to increase shareholder value. “The pace has accelerated during the period of the offer, and there will continue to be an aggressive search for opportunities and deals which will maximize shareholder return.”