Franco-Nevada board votes to adopt poison pill plan

Toronto-based Franco-Nevada Mining (TSE) has joined the growing list of Canadian resource companies planning to adopt a poison pill mechanism to prevent it from becoming the victim of an unwanted takeover.

Franco-Nevada’s chief asset is a 4% net profits and a 5% net smelter royalty interest in American Barrick Resources’ (TSE) Goldstrike mine in Nevada. The mine produced about 200,000 oz. gold last year and output is expected to increase to one million ounces within three years.

Franco-Nevada also owns 37% of Redstone Resources (TSE), which in turn has interests in the Falconbridge Dominicana nickel operation in the Dominican Republic plus the 37-million-ton (grading 3.92%) Coates copper deposit in the Northwest Territories. To ensure Franco-Nevada shareholders will not be subje ct to a creeping takeover, the board has approved the adoption of a shareholders’ rights plan and a supermajority voting approval requirement for certain mergers and similar transaction.

Under the plan, Franco-Nevada says it will issue one right for every common share issued and outstanding. In the event that 25% or more of the common shares are acquired without prior board approval, rights holders can acquire common shares at a 50% discount to the market price.

Other provisions of the proposed plan, which is subject to regulatory approval and shareholder ratification at the company’s annual meeting, June 27, include:

— A clause allowing the Franco- Nevada board to lower the threshold at which the rights are triggered to a minimum of 10%.

— A permit to allow the board to terminate or redeem the rights.

— The plan will also allow an offeror to submit to shareholders the terms of a proposed cash offer for all of the company shares. If the offer is approved by holders of a majority of common shares other than those held by the person making the offer, the rights would not be triggered.

According to Franco-Nevada, the supermajority amendment would make any mergers, amalgamations or other transactions involving any person holding a 20% stake in the company, conditional on approval by 80% of the company’s common shareholders. The amendment wouldn’t come into effect, however, if the transaction is approved by a majority of Franco’s independent directors.

Franco-Nevada says it is currently unaware of any proposed takeover bid or offers for the company’s common shares.