The tussel for control of a northern Ontario chromite find took a new twist Friday when Spider Resources Inc. (TSX: V.SPQ, Stock Forum) said it is ready to amalgamate with KWG Resources Inc. (TSX: V.KWG, Stock Forum) after KWG agreed to improve on its earlier merger offer.
By amending its bid, Spider said KWG has now matched a takeover proposal from U.S. resource giant Cliffs Natural Resources Inc. (NYSE: CLF, Stock Forum), which is offering to pay 16.5 cents a share for all of the common shares of Spider in an effort to gain control of the Big Daddy chromite discovery.
News of the proposed amalgamation was released after the close on trading Friday. Earlier in the day, trading in shares of both companies was halted ahead of the announcement.
Shareholders of Spider will have an opportunity to vote on the merger deal on July 8th. Shareholders of record on June 4, 2010, are entitled to vote at that meeting.
Together, the two companies would control a 53% stake in the Big Daddy chromite discovery, which is located in the Ring of Fire region of northern Ontario. The combined company has the right to raise its interest in the find to 60%.
KWG spokesman Chris Meraw the improved offer puts Cliffs under pressure to comb back with a counter punch. “If Cliffs is going to improve on this proposal, they are really going to have to sharpen their pencils,’’ Meraw said.
Under an earlier proposal, each Spider share would have been exchanged for 1.21 common shares of KWG. KWG was in turn planning to transfer to a subsidiary its interest in a railway right of way, plus a 2% net smelter return royalty stake in Big Daddy and two nearby chromite finds.
However, under the improved offer, each Spider share will be exchanged for 1.30 shares of KWG. The combined company will also retain a 50% stake in the 2% NSR royalty as well as the railway right of way.
The two companies said they expected the merger to be completed by July 16th, 2010.
Prior to Friday’s trading halt, KWG was trading at 12 cents, down 4%. Spider was trading at 16 cents, down 3%.