Partners sweeten Fording offer

Sherritt International (S-T) and the Ontario Teachers’ Pension Plan have boosted their hostile bid for Fording (FDG-T) by $6 to $35 per share, capped at a maximum of $850 million.

With about 50.6 million Fording shares outstanding at the end of September, the offer is worth nearly $1.77 billion.

The revised offer also allows Fording shareholders to take one exchange right (to a maximum of 42.4 million) per tendered share. One right is exchangeable for one new unit in the Canadian Coal Trust, a new income trust focused on metallurgical coal.

The Teachers’ Pension Plan has agreed to convert its 3.2 million Fording shares for exchange rights.

If all Fording shareholders, except for the Teachers’ Pension, go for the cash, each would be limited to $17.63 plus 0.496 of an exchange right for each of their shares.

Under the Partnership’s new plan, Fording’s metallurgical coal assets would be combined under the Canadian Coal Trust banner with certain coal and port facilities assets owned by the Luscar Energy Partnership, a joint venture between Sherritt and the Teachers’, and Consol Energy. The trust would also hold Fording’s industrial mineral assets.

Canadian Coal Trust would become Canada’s largest metallurgical coal producer.

In the end, Sherritt and the Teachers’ Pension Plan would equally share a 48% interest in the new trust. Fording shareholders would hold the remaining 52%. Consol will take trust units for its interest, and in the end there will be about 51.4 million trust units. .

The new offer runs through Jan. 6, and hinges upon Fording shareholders rejecting Fording’s recently announced three-way deal at a Special Shareholder’s meeting slated for Dec. 20. The deal also requires approval by at least two-thirds of Fording shareholders.On Dec. 4, Teck Cominco (TEK-T) emerged as a white knight in Fording’s battle to fend off the Sherritt Coal Partnership’s bid. That deal sees Teck Cominco joining forces with Westshore Terminals Income Fund (WTE.U-T) to offer Fording shareholders either $34 or one new income trust unit (or a combination of each) for each Fording share tendered.

Teck and Westshore (which operates North America’s busiest coal export terminal, in Delta, B.C.) would each own 13.3% of the trust units, while Fording shareholders would have 73.3%.

If all of Fording’s shareholders go for the cash, each would be limited to $15.60 plus 0.541 of a unit per share. Fording has axed a previous $3-per-share cash bonus.

Both offers include an estimated cash distribution of about $1.05 per unit during the first quarter of 2003, and “synergies” in the neighbourhood of $50 million.

Under the Sherritt proposal, the Canadian Coal Trust is expected to have pro forma debt of about $325 million, including about $120 million to unwind Fording’s foreign exchange hedge and a $51-million break-up fee due to Teck Cominco and Westshore, if that deal fall through.

Sherritt is slated to go before an Alberta Court of the Queen’s Bench on Dec. 13 to look for an extension to Fording Dec. 20 meeting to give shareholders enough time to consider its revised bid.