Mystery bid roils Allied Nevada Gold
“KILL-KILL-KILL,” read the press release distributed electronically at the middle of last Tuesday morning. “China Gold Stone Mining retracts press release issued in error this morning.”
And with that came the end to a bizarre seven-hour tale that sent executives of Reno-based Allied Nevada Gold Corp. scrambling, sent early-rising investors in the mining company to their online accounts in hopes of a quick pop in the company’s stock price, and sent plaintiffs’ attorneys in New York and Texas to their press offices in hopes of a class-action payday.
No one was talking last week about what happened, although Allied Nevada said it asked the Securities and Exchange Commission to investigate.
Here’s how the story unfolded:
At 3 a.m. on Tuesday, a press release from China Gold Stone Mining Development Ltd. announced that the company had launched an all-cash bid of $7.50 a share for Allied Nevada Gold.
That offer, which totaled about $780 million, was 74 percent higher than the stock’s closing price on Monday. The offer cheered Allied Nevada investors, who’d seen their shares fall from a 52-week high of $28.02 in early 2013 to lows barely above the $3 mark in December.
Allied Nevada is developing the Hycroft Gold Mine northwest of Winnemucca.
In its press release, China Gold Stone Mining identified itself as the Hong Kong-based owner of three gold mines in China with a total value of about $15 billion.
An online database of Hong Kong companies showed the company was incorporated in August 2011 as a local company and hadn’t filed reports with regulators since then.
The company said it hired CB Capital Partners Inc. of Los Angeles as its financial advisor in the transaction, and listed Christopher Baclawski, managing partner of the investment banking firm, as the contact for media inquiries.
Baclawski did not respond to requests for further information last week.
The press release also said the company hired the New York City firm of Patterson Belknapp Webb & Tyler LLP to act as its legal counsel.
When pre-market trading opened on Tuesday morning, Allied Nevada’s shares quickly rose by more than $1, trading mostly in small lots of 100 shares. But the Investment Industry Regulatory Organization of Canada stepped in at 5:51 a.m. (Pacific) to stop trading of the shares on the Toronto Stock Exchange.
(Trading in the shares reopened late on Tuesday, and finished the day about 7 percent higher than their previous-day close.)
In the meantime, Allied Nevada executives rushed to prepare a statement at the company’s South Meadows headquarters.
The key phrase in their statement: “The company seriously questions the credibility of the proposal.”
Allied Nevada said it couldn’t find any substantive information about China Gold Stone and said no public information indicated that China Gold Stone had the money to pull off the acquisition.
Further, Allied Nevada noted the announced plan from China Gold Stone didn’t follow U.S. and Canadian takeover laws.
As executives in Reno were preparing that statement, the law firms of Faruqi & Faruqi LLP in New York and Powers Taylor LLP in Dallas said they were investigating the offer to see if Allied Nevada’s board had been acting in the best interests of shareholders.
Powers Taylor attorney Willie Briscoe said at least one analyst quoted on Yahoo! Finance values Allied Nevada at $9.24 a share.
Neither of the law firms immediately responded to e-mailed requests to explain their next steps after the tender offer was pulled from the table.
Within a few minutes after Allied Nevada issued its statement, China Gold Stone issued its own press release, retracting its announcement just six hours earlier.
The company said the announcement of its bid for Allied Nevada had been issued in error and without the advice of counsel.
Peter Koven, a journalist for Canada’s Financial Post, reported later that some investors in Toronto entertained conspiracy theories that the announcement was an effort to manipulate Allied Nevada’s stock.
But no one was talking, even in the first hours after the events of the morning.
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