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Sprott Asset Management gains shareholder support in its bid to acquire gold and silver trusts
Canadian money manager Sprott Asset Management LLC has gained support from 40% of Central GoldTrust (GTU) and Silver Bullion Trust unitholders for its $899 million takeover bid, a source close to the matter told The Deal on Thursday.
In order for the deal to go through, however, Sprott Asset Management requires two-thirds of shares to be tendered into its offer by a Sept. 18 deadline.
Toronto-based Sprott Asset Management and the two trusts, which are run by Central Fund of Canada Ltd., have been engaged in a hostile back-and-forth since April, when Sprott first made its offer. The two trusts object to being taken over by the asset manager.
Most recently, on July 31, the Ontario Superior Court ruled in favor of Sprott in a case where the Central Fund of Canada was trying to raise the tender threshold for Sprott's offer to 90% from two-thirds.
Sprott first launched the offer to acquire Central GoldTrust and Silver Bullion Trust on May 27.
Under the terms of the proposal, announced April 23, Sprott would exchange units of its own trusts, Sprott Physical Gold Trust and Sprott Physical Silver Trust, for those of Central GoldTrust and Silver Bullion on a net asset value to net value asset basis. That value stands at $898 million, but could fluctuate depending on the price of metals.
Central GoldTrust and Silver Bullion, both precious metal trading companies administered by Central Fund of Canada, came under Sprott's radar after activist investor Polar Securities LP initiated a proxy battle at the target in February, Sprott CEO John Wilson told The Deal at the time. Polar, which has a 4.4% stake in Silver Bullion Trust and a 10.02% stake in Central Gold lost its attempt to get its three-board slate on the board of the trusts in May.
Aside from the sliding prices of precious metals, the target's redemption provisions, which force unitholders to redeem their units below net asset value, was also a leading factor of dissatisfaction among its shareholders, according to a Feb. 9 statement from Polar.
The Sprott offer will give Central GoldTrust and Silver Bullion unitholders more liquidity, the source said.
As of Aug. 27, the targets' largest shareholder Pekin Singer Strauss Asset Management Inc. of Chicago, which owns a 6.9% stake in the trusts, has tendered its shares in support of the offer. Polar Securities has also tendered its shares in favor of the Sprott offer.
Sprott retained Paul, Weiss, Rifkind, Wharton & Garrison LLP and Stikeman Elliott LLP as its legal counsel on the deal. Kingsdale Shareholder Services is serving as its information agent and depositary.
Central GoldTrust, which trades on the New York Stock Exchange, was trading up 1.25% on Thursday, at $38.7 per share, giving it a market capitalization of $748.03 million. Silver Bullion Trust trades over the counter.
Central Fund of Canada, Pekin Singer, and Polar Securities did not respond to multiple calls on Thursday. Sprott Asset Management declined to comment.