Canadian Royalties deals with Jaguar snag

Even though Canadian Royalties (CZZ-T, CRYAF-O) management and board have signed a support agreement to be bought out by Jien Canada Mining for $192 million the battle isn’t over.

Canadian Royalties chairman and CEO Glenn Mullan is now defending the merits of the deal he didn’t want to make. This time it’s Jaguar Financial stirring up trouble, and Canadian Royalties has put out a retaliatory press release today to clarify “misleading” information.

Jaguar wants to stop the deal from going through unless holders of the 7% convertible debentures get full value of the $137.5 million they loaned the company.

One of Jaguar’s arguments is it claims the deal is “oppressive” to debenture holders, who can opt to receive $800 plus accrued interest for each $1,000 principal amount. Shareholders will receive 80¢ per share. Jaguar says shareholders should receive less so that debenture holders are paid in full.

Jaguar points out a clause in the indenture agreement that states debenture holders get full value if a change in control occurs, but Canadian Royalties says Jaguar failed to mention a clause about an “extraordinary resolution” to amend the agreement.

Jaguar has suggested that shareholders got the better end in the deal over debenture holders because Mullan is a significant shareholder – with nearly 5 million shares out of 102 million shares outstanding.

Canadian Royalties says that while most of the management and directors have entered lock-up agreements with Jien Canada, a 75%-25% partnership between Jilin Jien Nickel Industry Company and Goldbrook Ventures (GBK-V, GBKVF-O), Mullan has not tendered.

There is no information on how many shareholders have tendered so far but about Canadian Royalties says 57% ($78.9 million) of debenture holders have either entered lock-up agreements or agreed to tender their holdings. Jaguar says of that 57% about $38.8 million in debentures has been locked up.

Canadian Royalties has responded to the long list of claims by Jaguar and Jaguar has fired back. Both companies have threatened to go to the courts over the matter. Jaguar has only three trading days left until the offer expires to stop the deal. Jien Canada needs 67% support of both share and debenture holders for the deal to go through.