Money manager Sprott Inc. launched a hostile $3.1-billion (U.S.) takeover offer Wednesday for Central Fund of Canada Ltd. (CFCL), the latest battle in Sprott’s two-year campaign to unite rival gold and silver bullion funds.
Toronto-based Sprott asked an Alberta court to allow all shareholders in Calgary-based CFCL to vote on a plan that will see their holdings exchanged for units in a new company, Sprott Physical Gold and Silver Trust. If successful, the takeover would make Sprott a leading bullion fund manager, adding $3.1-billion in CFCL’s portfolio to the $9.3-billion (Canadian) in assets under management at Sprott.
Sprott executive vice-president John Ciampaglia said in an interview the swap will unlock $304-million in value by eliminating the consistent discount to net asset value on CFCL shares, a discount that was at 9 per cent when the Toronto Stock Exchange closed on Tuesday. Units in Sprott’s bullion funds consistently trade at or above their net asset value.
Sprott took an initial run at CFCL in 2015, and while it failed to acquire the parent company, Sprott did receive 96-per-cent approval for a successful $1-billion hostile takeover of Central GoldTrust, another bullion fund run by CFCL. Taking over CFCL presents significant legal challenges, as the parent company has a dual-share structure.
Taking over CFCL presents significant legal challenges, as the parent company has a dual-share structure. There are 40,000 voting common shares, and these are controlled by the Spicer family, who founded the company, along with 252 million outstanding Class A CFCL shares, with no voting rights.
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