Coal battle flares up

Fording took a swipe at the Sherritt Coal Partnership II’s revised offer on Friday, calling it a "smoke and mirrors offer that provides a little more cash offset by a lot less unit value.”

The Calgary-based coal miner left no doubt as to its feelings calling the offer, "inadequate, self serving and inferior."

Fording’s chairman, Richard Haskayne, said, “In 25 years as a corporate director in Canada, I have never been presented with a more questionable document than the new Sherritt offer.”

Earlier in the week, Sherritt International (S-T) and its partner, the Ontario Teachers’ Pension Plan, mailed out its revised offer to Fording shareholders. The bid has been revised from $29-per-share to $35 a share or one trust unit in a new income trust.

However, in Friday’s press release Fording said that its review of the revised bid indicates that the proposed Sherritt trust units could be worth $10 less than a unit of the planned income trust to be formed under the competing bid involving Fording, Teck Cominco (TEK-T), and Westshore Terminal Income Fund (WTE.u-T).

Fording’s board also said that it believes that, "the one-year limited subordination feature proposed by Sherritt will be necessary, and likely not sufficient, to achieve the distribution levels that they are claiming under their offer.”

Under Sherritt’s offer, the Partnership’s share of quarterly cash distribution is subordinated. Therefore, the $1.05 payout to unit holders is guaranteed, to a maximum subordination of $11.25 million per quarter.

“The Board of Directors believes that after the expiry of the subordination feature the distributable cash under the Sherritt proposal will be less than that under Fording’s Income Trust,” Haskayne added.

Fording’s review also concludes that the Partnership’s offer includes various related party transactions that would benefit the partners at the cost of Fording shareholders.

Fording also says that potential synergies claimed under the Partnership’s plan are overstated compared to those under the Fording-Teck deal. The review also suggests that the Sherritt bid greatly inflates the value of the assets contributed by Sherritt and undervalues Fording’s assets.

Fording also says it is looking to have the Partnership’s bid examined by U.S. and Canadian securities regulators as it, "raises significant regulatory questions." The Calgary-based coal miner also says the bid fails to meet the requirements of its shareholder rights plan. Fording says for the bid to qualify as a permitted bid it would have to be extended until Jan. 23. Sherritt’s revised offer expires Jan. 6.

Fording requested that Sherritt extend its bid on the basis that Fording would postpone its shareholders meeting until Jan. 22; Sherritt refused to give Fording shareholders "such reasonable time," said Fording.

Under Fording’s three-way plan, shareholders are offered $34 or one new income trust unit (or a combination of each) for each Fording share tendered. Fording shareholders are slated to vote on their company’s conversion plan on Jan. 3.

Both companies shares were in the red in mid-afternoon trade on Dec. 20.

Fording was trading 29 lower at $32.89; Sherritt was off a penny at $4.20.