The Other Shoe DropsHigh Desert counters takeover, offers share buyback
2008-11-28 09:35 ET - News Release
Mr. Paul Haber reports
HIGH DESERT GOLD CORPORATION ANNOUNCES SUBSTANTIAL ISSUER BID AT CDN.$0.27 PER SHARE
High Desert Gold Corp. is making a substantial issuer bid, pursuant to which the company will offer to purchase for cancellation a maximum of 36 million common shares of the company (approximately 87.7 per cent of the currently issued and outstanding High Desert shares) at a price of 27 cents per High Desert share. The purchase of High Desert shares will be financed from existing cash and will result in a distribution of a substantial majority of High Desert's cash. The directors and officers of High Desert (holders of approximately 4.2 per cent of the currently issued and outstanding High Desert shares) have agreed not to tender to the offer, making the offer effectively for 91.5 per cent of the remaining High Desert shares.
The offer is being made to afford High Desert shareholders an opportunity to realize a cash return for all or a portion of their investment in High Desert at a premium of 42.1 per cent per High Desert share to the offer, reported in Stockwatch on Oct. 28, 2008, of Northern Financial Corp., of 19 cents per High Desert share.
Since the Northern offer was commenced on Oct. 30, 2008, High Desert has been reviewing alternatives and has been actively seeking potential superior transactions with interested parties. High Desert has not yet received any sufficiently attractive superior offers and has therefore determined to provide High Desert shareholders with the choice of receiving a distribution of a substantial majority of High Desert's cash in the near term.
In presenting the offer, the High Desert board is effectively giving High Desert shareholders a choice of: (i) selling all or most of their equity interest in High Desert, resulting in a cash return in the near term; or (ii) keeping their equity interest in High Desert, resulting potentially in an increased proportionate equity interest in High Desert following completion of the offer. Assuming the offer is completed, High Desert expects to continue its business and operations as an exploration company, however, for the near term on a substantially modified basis given the resulting reduction in working capital as a result of the offer. The offer does not constitute, nor is it intended by High
Desert to be followed by, a going-private transaction.
The High Desert board, in making the decision to present the offer to High Desert shareholders, makes no recommendation to any High Desert shareholder as to whether to deposit or refrain from depositing High Desert shares to this offer. Each High Desert shareholder should make his, her or its own decision whether to deposit High Desert shares to this offer and, if so, how many High Desert shares to deposit to this offer. Each High Desert shareholder should carefully review and evaluate the offer in order to make such decision and consult his, her or its own investment and tax advisers for assistance.
The offer is not conditional upon any minimum number of High Desert shares being validly deposited, however, the offer is subject to other customary conditions. High Desert reserves the right to withdraw, terminate or amend the offer unless such conditions are satisfied. If the number of High Desert shares validly deposited in response to the offer is greater than the maximum of 36 million High Desert shares, the High Desert shares deposited to the offer shall be taken up on a pro rata basis, disregarding fractions, according to the number of High Desert shares deposited by each depositing High Desert shareholder.
Full details of the offer, including the procedure for depositing High Desert shares, and an accompanying issuer bid circular and other related documents will be mailed to High Desert shareholders as soon as is reasonably practicable. The offer documents contain important information which should be read carefully before making a decision with respect to the offer. The offer will remain open for acceptance for at least 35 days, unless withdrawn or extended by High Desert.
The description above of the offer is qualified in its entirety by the offer documents, which will be available on SEDAR under the company's profile.
High Desert shareholders who have deposited High Desert shares to the Northern offer of 19 cents will need to immediately withdraw their High Desert shares from such offer if they wish to deposit such shares to High Desert's offer of 27 cents.
The company also announced that Northern has indicated its interest in entering the company's data room. In order to enter the data room, consistent with all other interested parties, Northern is required to execute a confidentiality agreement. At Northern's request, the company has agreed to remove all of the standstill provisions in the form of confidentiality agreement that has been previously executed by each interested party who has been given access to the data room. To ensure a level playing field among all potential parties to a superior transaction, the company has also agreed that such standstill provisions in those previously executed confidentiality agreements are hereby waived and are no longer applicable.