Carlisle Goldfields Limited T.CGJ

FP: The Carlisle Gold-AuRico deal: A change of control but

[casher]

What a minefield.

We are referring to the situation surrounding Carlisle Goldfields Ltd., a small (market cap of $15-million) Canadian-based gold exploration and development company that’s received two potential change of control possibilities with the distinct chance shareholders may not be able to accept the highest offer. The situation is also a cautionary tale about how some potential bidders dicker so much that an alternative, less-attractive offer comes along.

Here’s the background:

• One week back, Carlisle Gold announced it had signed a deal with AuRico Gold Inc. (market cap $1.1-billion) to issue 70.6 million shares – enough for a 19.9% stake – at $0.08 a share. One year back Carlisle implemented a shareholders rights plan that kicks in when an investor acquires a 20% stake. Apart from anteing up $5.65-million for the shares, AuRico has also agreed to pay $5-million to acquire a 25% stake in Carlisle’s key asset, the Lynn Lake gold mine in Manitoba. As part of that deal, AuRico could also acquire another 26% of the mine by spending $20-million over the next three years. AuRico could also gain another 9% to bring its stake to 60%. Under this scenario, AuRico could spend $30.65-million to acquire 60% of the mine and 19.9% of the company.

• A few days later Amsterdam-based LSE-listed Nord Gold, announced it wanted to make an offer to Carlisle, specifically requesting the target’s board “consents to receive an offer.” If the board so decides, then Nord Gold “would be prepared to make an offer” at $0.096 a share. If accepted – and one of the conditions of acceptance was that the Carlisle/AuRico transaction be called off – then Nord Gold would spend $27.3-million for 100% of the shares.

• Carlisle Gold responded and said Nord Gold’s desires are not so easy to implement. The reason: a few months back Carlisle and Nord Gold signed a mutual confidentiality agreement the effect of which was to limit Nord Gold for two years from making an offer. Carlisle added that while Nord Gold’s proposal “may be in compliance” with the agreement, it is however “in clear violation of the terms of the agreement.”

So what’s at stake here? Here are some issues:

• Carlisle’s board can only deal with what’s brought to it (or what it initiates) and do the best for the company in the circumstances. From that perspective it has worked with AuRico for a few months and agreed to a transaction that advances the development of the company by ensuring that there’s enough new cash to do so. And Carlisle will need more cash – at least $180-million – before the production starts in the third quarter of 2018.

Indeed the cash is already flowing given that AuRico has already paid an initial $5-million;

• But in agreeing to the AuRico deal, Carlisle has effected a change of control and AuRico’s hasn’t received a premium. (Reinforcing that change of control, AuRico has obtained pre-emptive and matching rights.) But given that a change of control is occurring – via AuRico’s stock and asset purchase — Carlisle’s shareholders perhaps should have a say. That’s what Nord Gold has noted in letters it’s written to the TSX.
Carlisle did not return calls seeking comment.

[hrattle]

Seems to reinforce the view that Nord Gold "dickered" and CGJ management had no choice but to take AuRico's offer (as it was the only/best one on the table). In any case I'm not convinced shareholders would take Nord Gold's offer - if it was raised a few pennies, maybe. 12 cents might do it.

[99999gold]

12c may do it but Aurico can match it so either way it's still a bargain at these levels, I don't think Nord Gold will go away that easy so I will buy at 5c - no way it sells for 50% disc from its imply value either mgmt stick with aurico and or the potential offer or revised offer that may still come from Nord. 

[casher]

 I would expect they would be willing to pay even up to almost 20 cents ~ 50 million market cap for this asset. That would represent 10% of NPV. Obviously they start the bid low, they want to get it as cheap as possible but I think 15-20 cents will be the accepted offer at the end of the day. GLTA

[Winny1]

I think basically what happened was Nordgold told Carlisle to take a hike or take the lowball offer of say 6 cents for the Company. So Carlisle management finally found a partner in Aurico and that really surprised Nordgold because Carlisle management didn't communicate the deal with it's shareholders and just went ahead with the announcement. I think there will be another offer somewhere

[99999gold]

this is also a cautionary tale of how and when not to nickle and dime, offer 50m now for all shares of CGJ and be done with it, in a grand scheme of things that's not a lot of money for nord gold if they do all stock. 12-15c is dickering around, 20c does it and Aurico goes away - they can't justify that kind of price with their own shareholders or maybe I'm wrong and they'll match

[Winny1]

As an example, DM (Duluth Metals) was looking for financing and when the deadline was up, Antofagasta came in and offered 45 cents. A very, very low market cap of around 60 million. I see a similar thing with CGJ. Interested companies will wait as long as they can before they make their move.

[99999gold]

and all this with gold rallying... go figure that stock trades at this level.