Saying a not-so-pleasant and very expensive goodbye to Opta Minerals

It may be a record for any takeover: the expense of closing the deal – defined within the circular as the per share estimated transaction cost – amount to about 25 per cent of the items shareholders will get.

But this is the state of affairs at Opta Minerals, which is set to become put out of its misery at month-end when its shareholders gather to vote with an offer from Speyside Equity Fund.

And while the vote is really a mandatory area of the process, it won’t have an effect on the outcome considering that SunOpta, the major shareholder and former 100 per cent owner, has decided to vote its 65.8 per cent block to aid the transaction. SunOpta is deemed to become area of the minority.

While shareholders will get an internet $0.52 a share, the way the deal continues to be structured, the sale may very well be cash payment of “$0.6933 per Opta share minus the per share estimated transaction cost” of $0.1731. Those transaction costs include meeting expenses, the expense of the fairness opinion along with other advisory fees (understood to be US$1 million), costs of D&O insurance plus change of control payments ($866,000 in most) to five management staff.

“It’s exorbitant and I’ve never seen shareholders having to pay for such costs from their proceeds. We have already voted our 584,538 shares against the amalgamation. We own 3.2 percent and will likely be exercising our right of dissent,” noted Stephen Takacsy, chief investment officer at Montreal-based Lester Asset Management.

Related

Deal to privatize Opta Minerals raises concerns for minority shareholders

Takacsy, who bought the shares in mid-2014 following the announcement of a strategic review and reckons the cost being offered is not high enough, has filed complaints using the OSC and TSX requesting they look into the transaction. “We have requested SunOpta to become excluded in the definition of a minority shareholder.”

The transaction also shows that careful judgment and luck are needed when a minority shareholder buys right into a company that has a major shareholder whose affection for, and interest in, the company waxes and wanes with time. Opta Minerals was spun from SunOpta in February 2005 once the new issuer raised $19.8 million via the sale of $4 units.

The three acquisitions Opta Minerals made over the period 2011 to 2012 saddled the company with $34 million of debt – a part of a plan to expand the company. In hindsight it would have been better served by a mix of equity and debt. Those acquisitions came after Opta Minerals, “following discussions with SunOpta,” launched then abandoned a strategic review.

In the circular, we’re told that “for yesteryear many years,” SunOpta has sought to divest non-core assets, “including its stake in Opta Minerals.” At the begining of 2014, SunOpta restated that objective. The cost which will accepted under those circumstances is most likely different from what will be accepted when profit maximization may be the objective. But SunOpta’s decision to simply accept the $0.35 per share cash and also the $0.17 note option rather than cash C probably helped the customer in putting the offer to shareholders.

On Tuesday SunOpta, said, “it didn’t have further comment other than its pr release.”

And the company – and its adviser – looked far and wide following the strategic review launched in mid-2014: 148 parties were contacted; 11 attended management presentation; three submitted proposals but none resulted in a definitive offer. Last Spring, Speyside Equity was contacted and a deal eventually struck.

Financial Post

bcritchley@nationalpost.com