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OSC orders Sprott to enhance disclosure of hostile offer in lenghty bullion battle

OSC orders Sprott to enhance disclosure of hostile offer in lenghty bullion battle

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20th November 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The Ontario Securities Commission (OSC) has ordered Sprott Asset Management to issue a new "notice of change" to enhance disclosures to unitholders of Central GoldTrust (GTU) and Silver Bullion Trust (SBT) regarding amendments it made to the voting powers of attorney, sought through its hostile bid to acquire all of the units of the two bullion funds.

The OSC also barred Sprott from exercising rights attached to the voting powers of attorney within 15 days of issuing such a notice. The OSC had, however, denied an attempt by the GTU and SBT trustees to cease-trade the Sprott offers.

“We are pleased with this outcome and thank the OSC for its attention to this matter. Sprott intends to take immediate action to update its disclosures and, ultimately, provide unitholders with a forum to vote on the merger transaction outlined in the Sprott offers,” Sprott Asset Management president James Fox stated on Thursday.

Sprott had, early this month, changed its hostile offers – launched in May – altering the intended use of the voting powers of attorney granted by those unitholders that had tendered to the Sprott offer. Sprott now intended to use the powers of attorney to replace the independent trustees of GTU and SBT and to elect Sprott insiders as trustees, if more than 50.1% of the outstanding units of GTU and SBT were tendered to the offer, down from two-thirds of units initially sought.

Sprott’s offer was scheduled to expire on Friday at 17:00.

Sprott had been arguing that its offer, which entailed an exchange of units, represented a premium price, given that the two Central trusts had been trading at a discount.

GTU and SBT had applied to the OSC for an order, which, among other things, would prevent Sprott from using the powers of attorney in this manner, in part because of the lack of proper disclosure about the change of intent.

WHITE KNIGHT
The order followed on the heels of Central announcing on Tuesday that a "white knight" had stepped forward in the acrimonious takeover offers.

A day before Central and Sprott faced off in court, GTU and SBT had submitted a letter of intent with investment management firm Purpose Investments to convert GTU and SBT into exchange-traded gold and silver bullion funds, respectively.

Purpose, which had accumulated about $1.4-billion in assets under its management since its creation about two-and-a-half years ago, was formed by Som Seif, the mastermind behind Claymore Investments, which had about $8-billion in assets when it was sold to investment giant Blackrock in 2012.

The proposed conversion would involve certain amendments to GTU and SBT’s "declaration of trust", which would be put to unitholders at a special unitholders’ meeting, expected to be held in February.

“It represents a clearly superior alternative for unitholders to Sprott’s inadequate hostile offer. Unitholders are expected to benefit from the elimination of discounts to net average value and enhanced liquidity, while preserving GTU and SBT’s low management fees, industry-leading bullion security and safeguards, sound governance and tax-efficient structure,” Central’s board stated on Tuesday.

Exchange-traded funds were among the most efficient investment vehicles, as market price and net asset values were aligned with each other, eliminating discounts or premiums, while demanding lower management fees.

The addition of the gold and silver bullion exchange-traded funds would fill a gap in Purpose’s portfolio, as it did not currently offer such products to customers.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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