UPDATE: Placer and Barrick take a breather

Placer Dome (PDG-T,PDG-N) and Barrick Gold (ABX-T, ABX-N) took a break from a month-long sparring match on Dec. 11, as Placer agreed to drop its poison pill in exchange for more time.

Barrick had previously asked the British Columbia Securities Commission (BCSC) for a cease-trade order on Placer’s shareholder’s rights plan. The plan is described as a poison pill because it would let shareholders of the Vancouver-based company buy shares at a discount under certain conditions and was designed to help fend off unwanted takeover bids.

Placer agreed to waive the rights after Toronto-based Barrick committed to extending its offer until mid-January, giving Placer more time to either find a white knight or negotiate a sweeter deal with Barrick.

Barrick has dropped its request to the BCSC and has agreed to extend its takeover bid deadline to Jan. 16 from Dec. 20.

Peter Tomsett, president and chief executive of Placer Dome, said in a statement that waiving the rights plan for Barrick’s offer would eliminate the distraction of legal and regulatory challenges.

John Ing, an analyst with Maison Placements in Toronto, says squabbling between the two majors over the past month has been posturing, and that events are now unfolding as he expected.

“Placer would eventually, through back channels or directly, begin discussions with Barrick,” Ing says.

And while Ing says the bid is likely to be sweetened slightly, Barrick has consistently said that its offer is fair, as it includes a 24% premium on Placer’s share price at the time the offer was made.

For its part, Placer has set up a data room to allow other companies to look at its books with a view to eliciting a competing offer, most notably from Denver-based Newmont Mining (NMC-T, NEM-N). If Barrick takes over Placer, it would leapfrog Newmont as the world’s number-one gold producer.

But questions have recently been raised regarding Newmont’s interest. While the company is said to be keen on Placer’s assets in Nevada, Ing says Newmont has reservations about Placer’s over-budget South Deep project in South Africa, and operations in Papua New Guinea.

In addition to such concerns, Ing says the Securities and Exchange Commission is also a deterrent. It took Newmont over a year to satisfy SEC requirements for its 2002 takeover of Frano-Nevada Mining.

As a Canadian-based company, Barrick does not have to deal with such burdensome regulations.

“Barrick already has their circulars in the mail,” Ing says.

Placer Dome’s board previously recommended that its shareholders reject Barrick’s offer and not tender their shares, arguing the offer was opportunistic and didn’t fully value Placer’s assets.

Barrick’s offer is for $20.50 for each Placer Dome share, with about 87% offered in Barrick stock and 13% in cash.

The bid includes a side deal with fellow Canadian miner, Goldcorp, (G-T, GG-N), which would buy Placer Dome’s Canadian assets for $1.35 billion, should the takeover succeed.