Conwest set to merge with MRI and Barons

Toronto-based Conwest Exploration (TSE) says the terms of a proposed merger with its two subsidiaries Mineral Resources International (TSE) and Barons Oil (TSE) have been unanimously approved by the boards of each company. Conwest already owns 51% of MRI which in turn owns a majority interest in Barons. The latter company produces oil and gas in Western Canada, while MRI’s main revenue comes from the Nanisivik zinc-lead-silver mine on Baffin Island in the high Arctic.

Special management committees, appointed in February to review terms of the proposed merger, have tabled their recommendations to each board, and favorable fairness opinions have also been rendered by ScotiaMcLeod and First Marathon Securities.

Under the merger, MRI shareholders will receive one class B subordinate voting share of Conwest for every 2.35 common shares of MRI, while shareholders of Barons will receive one class B share for every four common shares of Barons.

When first announced, the merger proposal contemplated the exchange of 2.5 common shares of MRI for each Conwest class B share. However, a new exchange rate resulted from negotiations between the special committees of Conwest and MRI.

Pursuant to the merger, Conwest will assume the obligations of MRI regarding its outstanding debentures which will become convertible into class B shares of Conwest at $11.75 per share.

Conwest President John Lamacraft says the merger will result in “a stronger financial base for new investments and projects,” currently beyond the scope of any one of the companies alone.

For the year ended Dec. 31, Conwest reports net income of $10.3 million, or 78 cents per share, and had working capital of $57.3 million.

As a result of the merger, MRI shareholders will receive a 67% increase in their dividend and Barons shareholders will start receiving annual dividends of 11 cents per Barons share.

The company’s simplified corporate structure should also lead to administrative savings as well as facilitate financial and tax planning.

Conwest also owns minority interests in a number of other junior mining companies including Consolidated Professor Mines (TSE), holder of the Duport gold deposit with proven and probable reserves of 937,000 tons grading 0.39 oz. gold per ton.

The deal will require the approval of the majority of each company’s minority shareholders. A meeting of Barons shareholders is scheduled for May 8 in Lethbridge, Alta., while MRI and Conwest shareholders will meet on May 10 in Toronto.