Glamis extends Eldorado offer

The battle for control of Eldorado (TSE) shows little sign of letting up.

Glamis Gold (TSE), which launched a takeover bid for the Bermuda-based company in early June, has extended the deadline for its offer to July 20 from July 6.

Glamis is seeking to acquire all the convertible debentures, special warrants and common shares in return for $1.20 in cash plus 0.4 shares of Glamis per common share. The deal is worth about $5.60 per share, based on Glamis’ current $11 trading level.

The offer is not being made to residents of the U.S. and is subject to Glamis receiving 75% of the company’s issued capital on a fully diluted basis.

Eldorado currently has 14.6 million shares outstanding, of which 23% are held in the U.S. (as of year-end). The company has a further 3.4 million special warrants outstanding, which are convertible into the same number of common shares. It also has US$10 million in 8.25% debentures, which are convertible into common shares at US$3.25 per share. Eldorado estimates that more than half of the special warrants are held outside Canada, whereas the debentures are largely in Canadian hands.

The purpose of Glamis’ extension is to allow it time to request that the Ontario Securities Commission convene a hearing to consider issuing an order that would render the Eldorado shareholders’ rights plan inapplicable to the Glamis offer.

Glamis contends that, by retaining the so-called “poison pill,” Eldorado’s management is not acting in the best interest of shareholders.

“It is time for the poison pill to go, and let Eldorado shareholders decide for themselves,” insists Glamis President A.Dan Rovig.

Eldorado’s shareholders approved the rights plan at this year’s annual meeting. It would come into effect if a third party were to acquire more than 20% of the issued capital without approval of the board of directors. In such a case, shareholders (other than the hostile third party) would be issued one right for each share held. Each right would enable the holder to buy an addition share at half the going market price.

Eldorado has denounced the Glamis offer as “abusive, coercive and discriminatory.” It points out that more than 25% of Glamis’ shareholders are residents of the U.S. and that the time frame of the offer is compressed.

Moreover, Eldorado’s board of directors continues to view the offer as inadequate and not in the best interests of the company and its shareholders.

Nevertheless, Eldorado’s board has resolved that if the Glamis offer is amended to include all security-holders and if the minimum tender of 75% is achieved for each class of security, the rights plan would be waived.

James Billingsley, vice-president of Glamis, explains that it would take at least two months to get clearance from the U.S. Securities and Exchange Commission in order to make the offer available to shareholders in the U.S.

“We are not holding back from the American shareholders,” he says, pointing out that once the takeover is completed, the offer would be cleared in the U.S., at which point Americans would be able to tender their shares on the same terms.