RSA Update on Winspear, Aug 13 2000
Winspear Diamonds Inc ....... WSP on TSE ......... Recent Price $4.30
Entry Price - $2.31 .......................... Opinion - hold/sell
revised to tender at $5.00
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Late breaking news with WSP, just after I prepared this update. I left the
update as is, but the bid for Winspear has been increased to $5.00 and
WSP management has agreed to tender to it, so it appears the takeover battle
is over at $5.00, see news attached to the bottom of this update. A
competing bid from a 3rd party is possible, but I doubt it, if Winspear
accepted the De Beers offer, it means they did not have high hopes of
a competing bid.
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Thursday, WSP announced an updated resource study that confirms a
mineral resource greater than reported in the July, 2000, scoping
study. The updated resource study documents a mineral resource
comprising, indicated resources of 21.6 million tonnes containing
41.1 million carats and additional inferred resources of 24.0 million
tonnes containing 45.3 million carats.
A total of 384 holes has been drilled in the Snap Lake area. The
updated resource study includes the results of an additional six
holes drilled in late 1999 and 39 holes drilled in 2000. Three
additional holes to the northeast of the inferred outline announced
July 31, 2000, have significant kimberlite intersections, indicating
that the dyke is open beyond the present drilling.
De Beers reaction
Commenting on the Winspear release Richard Molyneux, president and
chief executive officer of De Beers Canada Corporation noted it
contained little new information.
"Most of the data which has recently become available is largely
restricted to that which can be interpreted from a limited
number of bore hole intersections," said Mr. Molyneux, "More
importantly, today's information does confirm what we have been
saying all along which is that there are significant technical,
permitting and financial risks associated with bringing this
project into production."
The cat and mouse game continues. De Beers appears to be sticking to
their $4.25 offer, playing a game of chicken with shareholders. Take
$4.25 or we might withdraw the offer.
I believe that De Beers will have trouble getting the 50.1% they seek
without managements support and those close shareholders. The offer is
not extended to U.S. shareholders, so De Beers is trying to get 50.1%
acceptance from a possible base of approx. 70% of shareholders. In other
words, De Beers will need approx. 2/3rds of available shareholders to
tender their shares.
I don't think they will get this. Many shareholders bought the stock
between $2.50 to $4.00 and this is not a big profit for them. The
shareholder base has shifted more in the past year to longer term
holders who were waiting on mine development. I could be wrong, but
personally, if I owned any stock, which I don't, I would not tender my
shares at this price. Athough, I tend do be patient and have a longer term
outlook then many.
However, you have to make your own decision. The only sure way to get
$4.25 or there abouts is to sell in the market. If you tender your
stock, it does not guarantee that De Beers will get enough stock and
the price and deal go through. If you hold your stock, the price could
drop if De Beers does not get enough stock tendered and withdraws
their offer. I doubt this will happen, De Beers would likely increase
their price to try and win over more shareholders, very seldom the
first offer is the last in a hostile takeover, but this is not cast in
stone.
Another possible spin is Ashton could make a bid for Winspear. Ashton
vowed to fight the De Beers hostile bid for themselves. Ashton could
start a bidding war with DeBeers and use this as a playing card. If
you increase the price for our Ashton shares we will withdraw from
further bids on Winspear. However, De Beers would end up with Winspear
in the end if Ashton were successful in bidding for Winspear, but
remember De Beers wants to buy these companies as cheaply as possible,
but it is Ashtons and Winspears job to get the highest price possible.
This makes interesting speculation and is possible, but time is running
out on the Winspear offer and this option looks more remote as we
approach Monday morning.
The offer will expire at 5 p.m. (Vancouver time) on Aug. 15, 2000,
unless withdrawn or extended. The shares may be tendered by
holders whose certificates are not immediately available by
completing a validly executed notice of guaranteed delivery in the
form enclosed with the offer or a facsimile thereof. If you do not
have this form and wish to tender, you should contact your broker.
All trades on Aug. 14, 2000, will be for regular settlement.
All trades on Aug. 15, 2000, will be for special two-day settlement on
Aug. 17, 2000. These trades will be entered into the CDS
system with a settlement date of Aug. 17, 2000.
Conclusion
You have to weigh all the odds against your outlook, cost base of your
shares etc. and make your own decision. If you are happy with $4.25 or
there abouts you can get this by selling in the market. If you are
comfortable with taking more risk and seeking a higher price, but
perhaps end up holding longer term, than hold and do not tender.
I believe if shareholders, hold out, they will end up with a higher
price, if you tender and not enough stock is obtained by De Beers, you
would end up getting any higher offer that De Beers makes. However, if
you tender, it will help De Beers obtain the 50.1% they seek.
Another option is to sell part of your position at the market price
and gamble for a higher price with the rest. In any case, you are best
to wait as long as possible before making a decision. As long as the De
Beers offer is open, the stock should trade close to $4.25 and there
is still a chance of a competing bid. Any competing bid would have to
come Monday to give shareholders a chance to react and upset the De Beers
apple cart.
If there is no competing bid, those that hold out are gambling that
DeBeers will sweeten the offer to get them to tender. I view this as
the most likely outcome at this time, but we will know for sure by mid
week. One thing for certain, De Beers wants this asset or it would not
have bid for it and the bid proves the value of Snap Lake.
Best of luck what ever you decide. I will send out a brief update on
Tuesday or when news warrants.
Date Hi Lo Cl Vol
20000811 T 4.25 4.11 4.17 -0.06 473750
20000810 T 4.29 4.15 4.23 -0.07 1623385
20000809 T 4.32 4.25 4.30 0.00 109892
20000808 T 4.34 4.25 4.30 +0.04 204621
<A HREF="http://chart.canada-stockwatch.com/sw/chart.dbm?symbol=wsp">WSP Chart</a>
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Phone (604) 687-6644 Fax:(604) 687-1405 Toll Free: (US) 1-800-686-7744
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Website: winspear.com
(c) Copyright 2000, Resource Stocks Advisory
The information contained herein is based on sources and data which we
believe reliable, but is not guaranteed by us. This firm and/or their
employees, officers or members of their families and investment portfolios
managed by such organizations may have a position in the securities and/or
options relating thereto and may make purchases and/or sales of these
securities or options relating thereto from time to time in the open market
or otherwise. Furthermore, this information is furnished for information
purposes and is not intended to be construed as an offer to buy or sell
securities.
****************** NEWS ************************
Monday Aug 14 2000 News Release
Mr. Randy Turner reports
De Beers and Winspear have entered into an agreement for De Beers to
offer to purchase the outstanding common shares of Winspear at an
increased price of $5 cash per share. The offer, which has the
unanimous endorsement of the Winspear board of directors, is extended
to midnight PT on Aug. 25, 2000. In addition to the support of the
Winspear board, Winspear directors have agreed to irrevocably deposit
their 9.4 million shares of Winspear -- approximately 15.4 per cent
of the shares outstanding on a fully diluted basis -- to the De Beers
offer. Winspear's financial advisers have reviewed the offer and
provided Winspear's board with confirmation that the revised De Beers
offer is fair to Winspear shareholders from a financial point of
view.
"We are extremely pleased that we have been able to reach this
agreement," said Richard Molyneux, president and chief executive
officer, De Beers Canada Corporation. "We feel the transaction offers
excellent value for Winspear shareholders and thank Randy Turner and
the Winspear board for working with us to conclude an agreement that
has their support." The conditions of the original offer remain,
including acceptance of the offer by holders of at least 50.1 per
cent of Winspear shares determined on a fully diluted basis.
"We are pleased that De Beers recognizes the value and potential of
the Snap Lake diamond deposit and we concur with our advisers that
this revised $305-million offer is fair to the shareholders," said
Mr. Turner, president and CEO, Winspear Diamonds Inc.
Winspear's management and board of directors have agreed not to
solicit any competing offers, to provide De Beers with a right to
match any competing offer should one materialize and to pay De Beers
a break fee of 20 cents per Winspear fully diluted share under
certain specific circumstances. To accept the offer, shareholders
should contact their investment dealer or broker, complete and
execute the letter of transmittal which accompanied the offer and
deposit it, together with certificates representing their shares
before midnight PT on Aug. 25. Shareholders can also choose to follow
the procedure for guaranteed delivery by using the notice of
guaranteed delivery which accompanied the offer. Shareholders who
have already deposited their shares under the existing offer will
automatically receive payment for the increased purchase price of
their shares. |
