Teddy Bear syndicate may regain equity lost in 1984 consolidation

Teddy Bear Valley Mines (CDN) is hoping to reverse a 1984 share reorganization which concentrated ownership of the company in the hands of just a few investors.

Recently, Teddy Bear’s board of directors has been reviewing the two-phase reorganization after the Ontario Securities Commission (OSC) completed a preliminary investigation in 1991.

In August, 1984, Teddy Bear shares were consolidated at a rate of 25,000-for-1, eliminating approximately 425 shareholders. In October of the same year, the consolidated shares were split at a rate of 32,270-for-1, enhancing the holdings of a few surviving shareholders.

“Following an initial review of these matters, the company’s board has reached a preliminary conclusion that the 1984 reorganization failed to meet all legal requirements,” the company said in a prepared release. Teddy Bear is now proposing an application to court for a Plan of Arrangement. If successful, the junior would reinstate the 425 dispossessed shareholders and revise the holdings of those shareholders who survived the 1984 reorganization.

The “dispossessed” include unitholders of the Teddy Bear Valley Syndicate, formed in 1927, whose holding — estimated by Teddy Bear to be 1.23 million shares, or 48% — was transferred into the hands of company Chairman Ross Hofmann during the reorganization. The Syndicate — by that time consisting mainly of heirs unaware or unconcerned about their inherited penny stock — was simply unaccounted for.

It is unlikely that the ambiguities of the 1984 share restructuring would have come to light if a major gold deposit, the Lightning gold zone, had not been discovered just north of Hwy. 101 near Matheson, Ont., in the mid-1980s. Although the best holes were pulled from contiguous ground held by Freewest Resources (TSE) and Noranda (TSE), it was soon apparent that the gold zone dipped on to Teddy Bear’s property.

The Teddy Bear claims are now estimated to contain almost half of the Lightning zone’s preliminary reserve of 5.5 million tons at 0.25 oz. gold per ton and most of the exploration potential.

A joint venture consisting of Hemlo Gold Mines (TSE), Freewest and Newmont Mining (NYSE) is increasing its 30% interest in Teddy Bear’s property to 70%. Earlier this year, Paul Zyla, a former director, launched a lawsuit against Teddy Bear and Hofmann, recently unseated as chairman, concerning the 1984 reorganization. Zyla believes the Syndicate rightfully owns 1.58 million Teddy Bear shares (a controlling interest) currently registered in Hofmann’s name.

The ownership change proposed by Teddy Bear’s board of directors would result in the reduction of up to 9% of the issued and outstanding shares of the company.

Options on a total 135,000 shares have been granted to three directors of Teddy Bear at an exercise price of $1.75 and with an expiry date of Jan. 9. The proceeds will be used as working capital by the company.