Toronto-based Sprott Inc. said Wednesday it's making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.
The money management firm has filed an application with the Court of Queen's Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott's existing precious metal holding entities.
The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.
"They weren't interested in having those discussions," Williams said.
- MORE BUSINESS NEWS | Credit card delinquencies spike 23% in Alberta, Saskatchewan as national rate rises only slightly
- MORE BUSINESS NEWS | OPEC says there is room for the oilsands in world market
Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.
If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there's no guarantee they will make it that far.
"It is unusual to go this route," said Williams. "There's no specific precedent where this has worked."
Takeover success last year
Sprott did have success last year in taking over Central GoldTrust, a similar fund that was controlled by the Spicer family, after securing support from more than 96 per cent of shareholder votes cast.
The firm says Central Fund's shares are trading at a discount to net asset value, and a takeover by Sprott could unlock $304 million US in shareholder value.
Central Fund did not have any immediate comment on the unsolicited offer. Williams said Sprott had not yet heard from Central Fund on the proposal, but that some shareholders had already contacted them to voice their support.
Sprott's existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.