People in the dairy cattle industry must be scratching their heads this month and wondering where in tarnation he finds the time. Surely Stephen Roman has enough on his hands, what with the big cattle sale next week at Romandale Farms, just north of Toronto, without running off to Denver, Colorado, to look at oil wells. And there’s the money: why would a man who stands to make at least $1 million selling one of the best Holstein herds in the country want to turn around and borrow hundreds of millions of dollars—yes, hundreds—to buy some oil company when his hired hands don’t even know what’s to happen once the cattle are sold?
Stephen Roman does like to keep people guessing. He’s a man well-known for wearing his politics and his religion like an open kimono, but when it comes to his business dealings he moves like an eel through fast water. As president of Romandale Farms, he already had dairy farmers a-moo with speculation when he donned his other hat last week—as chairman, president and principal shareholder of Toronto’s Denison Mines Ltd.—and got the investment community kicking in their stalls by announcing what may be the largest private energy buy in Canadian history.
If Denison Mines succeeds in its plan—the acquisition of Denver-based Reserve Oil & Gas Ltd., including its oilrich Canadian subsidiary in Calgary, Canadian Reserve Oil & Gas Co. for $525 million (U.S.)—Denison will nearly treble its size overnight and become what some analysts are describing as potentially the most dynamic energy company in the country. Denison, now famous as Canada’s largest supplier of uranium from its Elliot Lake mine near Sudbury, Ontario, will suddenly become a major force in the Canadian oil and gas industry as well.
Just how long the company has been eyeing Reserve Oil as a potential takeover target is one of Roman’s many closely held secrets. He acknowledges that the two companies began discussing the deal “in earnest” about two months ago on the advice of Denison’s consultants. The fact that Reserve’s directors seem to have welcomed Denison’s approaches with open arms must in itself be heady musk for Roman. While never backing away from a scrap,
he suffered a sharp rebuff a year ago from Freeport Minerals Co., a New York company which so opposed Denison’s predatory sniffing around that it fattened Denison’s corporate wallet by nearly $50 million (U.S.) to buy back a 10-per-cent interest in its own stock —which Denison had acquired, appar-
ently, as a prelude to a take-over bid that was never made.
Roman loves to boast about Denison’s existing sorties into the oil and gas field—notably joint-venture operations in Greece and Spain—but it’s no secret that he has had the future of the company pegged for some time on expansion within North America. It appeals to all his instincts: nationalism, growth, stability, empire, power. “I am pleased,” he told Maclean’s, “to be guiding a Canadian company to reach abroad, creating a multinational energy corporation domiciled in Canada.”
No one in the energy industry today doubts Denison’s need to expand and diversify. Though still the cornerstone of its entire existence, and a reliable gravy train for years to come, Denison’s uranium interests are now committed to Ontario Hydro, along with foreign customers Japan and Spain, for the next 30 years. The Ontario commitment alone is expected to give Denison a profit of nearly $2 billion over the life of the contract. Though Denison made
overtures to purchase another uranium property last year, most observers say Roman has had his real sights set on oil all the time, and that the Reserve bid proves it.
“This is all very well,” cautions Gordon Ball, broker with the Toronto investment counselling firm of MacDou-
gall, MacDougall and MacTier, and onetime assistant to Roman at Denison. “However, it remains to be seen whether the deal will ever actually go through.” While there’s general admiration among industry observers over Denison’s move to acquire Reserve, there’s an equal measure of skepticism and doubt. What puzzles some analysts is the price tag, $27.50 (U.S.) a share, which they feel will do little more than flush out a raft of other suitors prepared to offer more. The total cost to Denison would be more than $600 million (Canadian)—making it the third largest take-over in recent Canadian history, exceeded only by the Thomson family purchase of the Hudson’s Bay Co. and Petrocan’s acquisition of Pacific Petroleums Ltd. Admittedly, it is a huge sum, but, say most observers, within Denison’s grasp through bank loans probably engineered by the Royal Bank (though Denison refuses to disclose its financing plans).
With analysts describing Reserve’s selling price as “a bargain,” it’s clear Denison will go ahead with the purchase if it gets that far. Between now and November, however, the earliest
most feel the deal can be concluded, it’s altogether possible a higher offer will appear on the horizon. Whether Denison would then be willing to engage in a bidding war no one knows. Some skeptics question Denison’s motives for flirting with the deal in the first place. They see the faint mirror of the “Brascan syndrome”—an attempt to take over a company so large that the cannibal corporation itself becomes immune to take-over. (It’s no secret that Dome Mines Ltd., with a 10-per-cent interest in Denison second only to Roman’s commanding position, has given Denison some long lingering looks.) Others hear an echo of the “Freeport sellout”— Denison’s own earlier manoeuvre of unloading its clutch of shares at a tidy profit when the price went up.
The point of the speculation is not to suggest any questionable motives on the part of Denison, or Roman himself, who is held somewhat in awe within the business community. It merely points out how genuinely shrewd he is, as Denison stands to gain whichever way the deal develops.
Even if it does fall apart, Roman may find he stays in touch with Reserve’s president, Paul D. Meadows, anyway. Meadows raises cattle himself.
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