CANADA - The Ontario Teachers' Pension Plan Board has taken the unusual step of buying a direct share in a Canadian coal mining company.
The ongoing bidding war for the Canadian coal mining company Fording, including one from Ontario Teachers’ Pension Plan Board backed by Sherritt International, has been resolved by a multi party agreement on control of the Fording Group.
Under the agreement Fording Inc is converted into a trust, the Fording Canadian Coal Trust, a partnership of Sherritt International Corporation, Ontario Teachers’ Pension Plan, Fording Teck Cominco and Luscar Energy Partnership.
The deal will create the second largest global producer of metallurgical coal, which is used in the steel industry, producing 20% of the world’s output. Coal production in 2003 is estimated to be 25 million tonnes.
Teachers’ will elect to receive units for each of the 3.2 million Fording shares it owns. This will give the pension plan a 6.7% direct holding in the Trust. Other shareholders will be given the choice of receiving C$35 per share, up to a maximum of C$1.05bn, one unit of the Fording Trust per share up to 21.4m unit or a combination of the two.
Those who choose cash for their shares are set to receive C$21.75 in cash, 0.379 of a unit of Fording Trust for each Fording share plus C$1.48 in total for each full unit from the additional special distributions.
The deal is subject to the approval of Fording shareholders as well as regulatory approval.
It was prompted by a hostile bid from Teachers’ backed by Sherritt in October, which valued Fording at C$1.6bn.
Brian J Gibson, senior vice-president of Global active equities for Teachers’ said: “Teachers’ is pleased to have been the catalyst for the creation of this new trust, which brings together Canada’s premier metallurgical coal mining properties.
“The high quality of the coal produced, the long life of the reserve base, the prominent position the Fording Trust will have in international metallurgical coal markets and the wealth of experience available to manage these assets, make the Fording Trust a benefit to Canada and an attractive investment for Teachers’.
“Investors will be able to participate in a trust that will have a sound capital structure with excellent corporate governance.”
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