Nordgold NV (NORD), owned by billionaire Russian Alexey Mordashov, offered to buy out the minorities of unit High River Gold Mines Ltd. (HRG) for $300 million in stock and cash as part of a goal to increase the parent’s market value.
The deal, valuing the unit at $1.2 billion, offers 0.285 of a Nordgold global depositary receipt or C$1.40 ($1.42) in cash for each High River share, Nordgold said today in a statement.
Nordgold plans to raise the proportion of its London-traded stock in public hands, and boost trading volume and market value by paying for High River with the parent’s equity, according to Chief Executive Officer Nikolai Zelenski. Nordgold trades at a discount to Russian peers Polyus Gold International Ltd. and Polymetal International Plc (POLY) because of its smaller free-float.
“We hope minorities will choose a share swap rather than cash,” Zelenski said today. “We consider Nordgold being undervalued, partly because of the low free-float.”
The parent, which owns 75 percent of Toronto-traded High River, would more than double its free-float to 23 percent from 10.6 percent if all minorities opt to swap their stakes for Nordgold shares, Zelenski told a call today. Nordgold set aside as much as $200 million of funds to buy out minorities, he said.
In July, the company said 28 percent of minorities, with a total 7 percent of High River, agreed to take Nordgold stock.
Nordgold plans to issue as much as 60 million new shares in the deal and Mordashov’s stake in the parent may fall to as low as 77 percent from more than 90 percent. The Russian company expects to save $3 million a year by delisting High River from the Toronto bourse during the first quarter, Zelinski said.
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