Remember the challenge to explain logical any part of the scenario - give us some insights. It would have been nice if it shed light on the reasons for or against a merger? Here is a post from the SPQ board that shows you how - Beautiful thinking.
Question for you...previously, Cliff'sexcluded itself from the DD spinoff as they "had no interest in diamonds". Is that a contractual exclusion, or can they now elect to receive their share of DD, which means they would have 19.9% ownership of DD ?
Very good question, TW !!!I In fact, I believe the answer to your question is the key to whole merger play, the integrity of the merger itself, and the associated alliances.
Now, here is what I want to bring to the forum. What if you were a sharp lawyer (not necessarily an ethical one which should be no surprise) and you were dealing with the bureaucratic management typical of larger companies like CLIFFs ? And being a smart lawyer of a small non-profit junior, you are a survivor and you go by the credo: "Never trust the big guys you are in bed with"
Wouldn't you arrange your legal contracts and dealings in such a way that you could legally engineer a way out if the "elephant" that you are partnered with decides to roll over on you ? Wouldn't you convince your larger partner that part of your business (ex. Debut Diamonds) has no interest to them and then design your contracts to state that the assets within that business are excluded from the partnership ?
And if you were even more brilliant, you would also have clauses that allowed you to transfer certain assets under your control into that business under certain conditions. And then you would create another company to satisfy your partner (ex. Canada Chrome) that appears to fulfill the intent of your partnership, but the legal contractual hooks of the assets may be weak or non-binding.
Posters on this board have inferred that Frank Smeenk is a slippery lawyer. I do not know, but we may end up being grateful that he is. At least for this particular crisis with CLIFFs and the merger issue.
We do know a few things, and can ask some obvious questions.
1) Canada Chrome was created for the CLIFFs / Krech Ojard / railroad-smelter infrastructure management. It has been cast aside under this latest merger proposal. Why ? If contracts were so tight, how could KWG transfer the assets to Debut Diamonds?
2) Debut Diamonds was created to manage the diamond exploration business of KWG. Nothing to do with the core business of steel making and CLIFFs. Why in Heaven's name is a railroad and smelter royalty contract for Chromite being placed into this division?
3) KWG management loaded up on millions of stock options in early May at 12.5 cents. Why would they do this is they knew that CLIFFs would soon offer a mere 13 cents for the company as a takeover.
4) And finally, why have KWG and SPQ now come public so fast to declare that they are defending themselves against the CLIFFs takeover proposal ? Why is the FRANKNEIL-stein monster being created out of the blue ?
I wonder: Could it be that Frank Smeenk and KWG may have suspected that CLIFFs was not to be trusted and had designed an escape path in case. Neil Novak is a geologist that stumbled into the greatest resource that he wasn't looking for: World class Chromite and Nickel lucky for us. But Frank Smeenk is a lawyer and his vocation is the manipulation of words and contracts.
Sorry TW. I could only answer your question with more questions. But I am here like all of you make money and trying to understand this chess game.
I have always stated my mind was open to all strategies. I have gambled all my life and have learned to a lot from crafty opponents. I have also lost by reading things wrong, but I do recognize now that I am in a brilliant high stakes game with SPQ/KWG/CLIFFs. And I am more than happy to share my thoughts with all of you.