northernminer.com
Inco offers to buy back Voisey's Bay preferreds
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09/06/2000
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Citing the need to eliminate a "conflict of interest" between its common shareholders and the holders of its Voisey's Bay Nickel preferred shares, Inco (N-T) is sending an offer to buy back the series for $7.50 plus 0.45 of a purchase warrant exercisable at $36.
Michael Sopko, Inco’s president, said the buy-back would allow the company to make choices between developing projects without creating a conflict of interest with VBN shareholders, who have a direct interest in seeing the Voisey's Bay nickel deposits in Labrador go into production.
VBN shareholders are entitled to receive 25% of the unallocated cash flow from the operations of Voisey's Bay Nickel, the Inco subsidiary formed to operate the project.
Inco announced that the buy-back, which would cost $195 million in cash and put 11.7 million warrants on to the market, is to be mailed out "as soon as practicable." The company will need to file an issuer-bid circular with Canadian and U.S. securities commissions. It estimated that the earliest possible closing date for the bid would be in mid-October.
Inco will withdraw its offer if less than 90% of the 26 million outstanding shares are tendered.
The exercise price of $36 for the warrants is a significant premium over the current price of Inco's common shares, which closed at $27.10 on Sept. 5 and were trading at $26.75 at presstime. An Inco executive suggested that the buy-back itself might be seen as opening up development options for Voisey's Bay and for other Inco projects and might push the value of Inco common shares closer to the strike price of the warrants.
The largest single holder of VBN shares, Franco-Nevada Mining (FN-T), has already entered a lock-up agreement with Inco covering its 37% interest in the VBN series. This allows Franco-Nevada to tender to an offer valued at 10% higher than the Inco offer. It also allows Inco to make a counter-bid, should a higher offer come in.
The Voisey's Bay Nickel shares were created for Inco's takeover of Diamond Fields Resources, the company that discovered the Voisey's Bay nickel deposits. The shares were meant to provide a vehicle for Diamond Fields shareholders to retain a direct interest in the project.
The shares rose as high as $43.75 in 1996. Over the past year, they have ranged from $6.15 to $14.50. They closed at $9 on Sept. 5, the day before the announcement, but rose to $11.15 by presstime. |
