Corona entertains takeover proposals

While not officially on the block, International Corona (TSE) is being courted by a number of international mining companies interested in a possible “business combination.”

Dundee Bancorp (TSE), Corona’s principal shareholder, says it would support a business combination “on terms favorable to all shareholders.” Dundee Bancorp holds a 30% equity interest and voting control of Corona indirectly through Dundee’s multiple vote and subordinate vote share structure.

Corona has a shareholders’ rights protection plan, sometimes called a “poison pill.” It allows any shareholder owning less than 5% of the issued shares to launch a takeover offer for all outstanding shares, but if a shareholder with more than 5% of the company’s shares makes an offer, each shareholder has the right to purchase an additional share at half the takeover price. On May 31 the rights provision is no longer in effect, opening the door to a creeping takeover or unsolicited takeover bids.

Corona President Peter Steen said the company is involved in negotiations with four large mining companies. “In the meantime, it’s business as usual.” Corona’s key asset is a 50% interest in two rich gold mines at Hemlo, Ont. Corona has been a “pure gold” company since October, 1991, when a corporate restructuring took place that transferred Corona’s non-gold assets to Dundee Bancorp.

Corona’s share price has deteriorated since the restructuring and now trades at about $3.75, a 52-week low. Corona believes, however, that its share price is also being battered by short-selling and by “unfounded rumors” that the company is under pressure by bankers and cannot meet its financial obligations.

Negotiations are continuing with investment dealers on the terms of a $50-million common share equity offering, and Corona is also involved in discussions for a new US$50-million gold loan to refinance the gold notes. Corona recently expanded its David Bell gold loan facility by about $40 million, and has rescheduled the first principal payments to the end of 1994. By the end of 1991, Corona had reduced its debt to $323.3 million from $461.9 million at the end of 1990.