Sporting a big golden butterfly pin on her pastel blue suit, Peggy Witte confidently announced last week that she was upping the ante in the betting war for Lac Minerals Ltd. Witte, the 40-year-old chairman of Royal Oak Mines Inc. of Vancouver, increased her bid for Torontobased Lac’s shares by about $2 a share, to about $16. That puts the maverick Witte back in the running for Lac, after her original bid was trumped by American Barrick Resources Corp. of Toronto on July 26. Although Royal Oak is less than one-third the size of Lac or Barrick, Witte’s gambit is being taken seriously by investors. Normand Lamarche, a resource fund manager for the Altamira group of mutual funds in Toronto, welcomed Royal Oak’s offer: ‘We like Peggy Witte. We’ve made a lot of money from her over the years.” But Lamarche, like most of Lac’s other big shareholders, is not in a hurry to make a final commitment. “For the first time in a long time,” chuckled Lamarche, “Lac shareholders are having fun.”
Lac shareholders are gleeful because, like any belle with three suitors, they are playing the rivals off against each other. Currently, they have three firm options to choose from—and the possibility of more to come. As of last Friday, Royal Oak’s bid was nominally the highest at about $16 a share, at current market prices, while American’s Barrick’s is now $13.42. But because both offers include shares as well as cash, investors are uncertain about the real value of either bid. As a result, many analysts believe Barrick continues to be the front-runner because of its size, financial strength, manage-
ment depth and proven track record at developing new mines. The third option is for Lac to remain independent. To bolster its case for that, Lac management has taken several steps to mollify its shareholders. And, in addition to those options, some analysts continue to expect that another bidder will come forward. As the uncertainty continued last week, senior executives at each of the three companies were working hard to sell their option, while disparaging their rivals’ options. We’re in the posturing stage right now—what people are saying and what they’re doing are entirely different,” says Lamarche.
Lac itself has the toughest sell because it is asking investors to be patient and wait for returns. But chairman Jim Pitblado, whose past career as a takeover specialist at RBC Dominion Securities was ideal preparation for this battle, is staging a lively defence. He was aided by the resignation of Lac’s previous chairman, Peter Allen, whose alleged poor management was cited by many disgruntled investors as the reason for their support of Witte’s initial offer. In addition, the company has announced a hefty increase in Lac’s gold reserves to 13.5 million ounces, from 8.6 million at the end of 1993. And that pleased investors because it pushed up Lac’s share price.
As proof of its ability to operate as an independent company, Lac also named a new president and chief executive officer, Peter
Investors are reaping the benefits of the struggle over Lac Steen. Steen, who was paid $1 million in 1993 as president of San Francisco-based Homestake Mining Co., is well-known in gold mining circles. In return for coming to Lac, with its uncertain future, Steen says Lac matched the terms of his employment at Homestake, gave him a signing bonus and stock incentives, worth amounts that he would not disclose. “I can tell you that there’s not even a golden parachute attached,” he added. He says he came to Lac “for the excitement.” And he says that with better management he believes that Lac’s share price can be worth $20 in two years’ time.
But Steen’s appointment was greeted with mixed reviews. While some analysts welcomed
him as a proven mining execu-
tive, others questioned whether Steen, at age 63, has the stamina and desire to rebuild Lac. And Witte criticized his efforts at Homestake, saying that the company’s relative share price suffered during his tenure. “He’s a very respectable CEO in the mining business,” said Witte, “but he’s not going to set the world on fire at Lac.”
Some investors, however, are supportive of Lac’s push to remain independent. Although companies that become takeover targets seldom escape, Bill Martin, manager of the Benham gold-index mutual fund in San Francisco, says that he favors that option in Lac’s case. “They’ve done a lot to address our concerns,” says Martin, a large shareholder in both Lac and Barrick. “With the announcement of Peter Steen and the increased reserves, Lac shares are up closer to their fair value. Shareholders have a better chance of realizing their full values by staying with Lac rather than taking either of the other bids.” Ian Lamont, a gold analyst with Yorkton Securities in London, agrees: “The removal of Peter Allen goes a long way to addressing the problems.”
But for investors like Lamarche, there is one other, even more important, factor to consider. “The market,” says Lamarche, “is sending signals, strong signals.” He is referring to the price of Lac shares, which despite Witte’s $16 bid never traded higher than $14.75 last week and which closed at $14 on Friday. Investors apparently believe that Witte’s bid is worth less than it appears, and that Munk’s must be higher. And the market, as they say, is never wrong.
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