Despite a bitter fight, it seems as though Scion Capital has lost in its bid to thwart
In mid-December, Gold Fields launched a friendly takeover bid for Bolivar Gold, a junior known mostly for its Choco 10 gold project in Venezuela. Scion, owner of 19.14% of Bolivar’s outstanding shares, claimed the offer was opportunistic and sought to scuttle the deal, filing legal proceedings in several courts.
Bolivar shareholders met in Toronto on Jan. 12 to vote on Gold Fields proposed takeover, to which Scion was vehemently opposed. The atmosphere inside the auditorium at the Toronto Stock Exchange was tense before the results were announced.
California-based Scion, and its representatives — huddled three rows back from Bolivar’s management — sent a series of dissenting salvos in the direction of Bolivar, culminating in a motion to dismiss Bolivar’s chairman and chief executive, Serafino Iacono, from chairing the meeting.
The motion was put down, and Peter Volk, Bolivar’s corporate secretary and legal counsel, told those on hand that 76.6% of Bolivar shareholders had voted in favour of Gold Fields proposed takeover. Gold Fields needed only 66% for the deal to go through.
Once the meeting was adjourned, Bolivar management was all smiles. The Scion team left the room quietly.
However, the status of Scion’s legal challenges against Bolivar and Gold Fields remains murky.
Scion contends that Gold Fields recent acquisition of 5.2 million Bolivar shares should be considered a take-over manoeuvre, and the purchase of those shares should be subject to stricter guidelines. In fact, Scion says, votes associated with those shares shouldnt have counted.
Legal proceedings involving the matter — filed with the Ontario Superior Court — are on hold until official results of the vote are made public.
And while a statement issued by Bolivar and Gold Fields on Jan. 16 said that Scion had dropped its claim with the Ontario court, a Scion spokesman says that is not the case.
“There will be no hearing on January 17, but we’re not abandoning it,” said John Lute, a spokesman for Scion.
With the deal apparently having more than the two-thirds needed for approval – even without the disputed votes — Scion’s legal position appears weak.
But Lute says his company will continue to move ahead with its legal challenges based on “other issues” — regardless of the result of the vote.
Those issues were outlined in a dissident circular dated Dec. 21, 2005. In it Scion contends that the Gold Fields offer doesn’t reflect the true value of Bolivar’s Choco 10 project.
Lute’s statement contradicts another made by Scion’s chief legal officer, Steve Druskin. After the Jan. 12 meeting, Druskin said Scion would stop its court action if the (voting) percentage is wide enough.
Who takes the credit?
Scion president Michael Burry labelled a 6.7% increase in the offer from Gold Fields on Jan. 11 an “insult,” but Druskin was quick to credit Scion for wringing more money out of Gold Fields.
“We’re thrilled to achieve thirty-million more for security holders,” Druskin said. “We’re disappointed in that we still see the asset as undervalued. But everybody did better than they were going to do two days ago. We couldn’t be happier.”
On Jan. 11, Gold Fields announced it had increased its offer to US$360 from US$330 million or $3.20 a share, up from $3.00.
“(Scion) said it was a miserable offer,” said Bolivar chairman and chief executive Serafino Iacono. “If they want to take the credit (for the increased offer), I think that’s fantastic. They can take it. If they want to take the credit, then they shouldn’t go to court.”
Meanwhile, Iacono wasn’t about to forget Scion’s scathing critiques of his company during the last month. At one point, Scion asserted that Bolivar management was placing its interests above those of shareholders.
“Have you heard any words from us?” Iacono asked rhetorically. “A one-sided fight is shadow boxing. We don’t want to fight with our shareholders. If the shareholders would’ve said no to this deal, our lives as management would’ve gone back (to normal).”
For Iacono, shareholder approval justified managements recommendation to accept Gold Fields bid.
“Today the market spoke,” Iacono said. “It’s a fair offer. It’s more than fair…only three-million shares outside of Scion said no. Everyone else said yes.” Scion is the largest holder of Bolivar common shares with roughly 21.5 million shares. In total, around 26 million shares voted against the deal.
Iacono said Gold Fields’ offer was the result of an ongoing development.
He explained that Gold Fields’ board rejected the acquisition plan five or six times. “The thing was rejected for many reasons. One of the reasons was country risk,” he added.
Scion wasn’t able to make that happen, and ultimately, Iacono stressed, it wasn’t able to win many shareholders.
Despite the many travails of the last month, Iacono says he was confident the deal would go through.
“It was difficult,” he said of the time leading up to the vote. “You get ups and downs in everything. But we always knew we had our core support of institutional investors, Canadian investors, and traditional mining investors who do their calculations and know their value.”
The fight isn’t over
In addition to its case with the Ontario Superior Court, Scion plans to make its opposition known in the Supreme Court of Yukon. The Yukon court will decide if the Gold Fields and Bolivar deal gets final approval. The hearing was scheduled for Jan. 19.
Scion spokesman John Lute says not only Scion, but other dissenting shareholders will be in Yukon for the court date. They will argue against the 4 million shares that were allowed to vote on the deal despite being purchased after the original take-over proposal from Gold Fields. It is not known who owns those shares. Sources said that they were allowed to vote on the basis of there being warrant conversions.
Despite such challenges Gold Fields’ spokesman Willie Jacobsz is confident of the Yukon court’s approval.
“We’re not concerned about it because we know that we’ve stuck to the rules and regulations,” Jacobsz told Reuters.
“We are sure the (Yukon) court will also take into account the support we received from the vast majority of Bolivar shareholders,” he said. “Clearly, Scion is alone in the position it holds about this transaction.”
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