Shareholder sues over gold mining merger

Grace Leong

Friday, June 23, 2000 | 11:06 a.m.

A day after North America's largest gold producer announced plans to buy Battle Mountain Gold Co. for $557 million in stock plus debt, a Battle Mountain shareholder filed a class action lawsuit in Las Vegas demanding a higher price for his stock.

Attorneys for David King say they are seeking an injunction in Clark County District Court to force Battle Mountain of Houston and its board to act in the best interests of shareholders. One demand is that other offers for Battle Mountain be considered.

"This was the only offer that was publicly announced," responded Les Van Dyke, Battle Mountain's spokesman.

Wednesday's merger will give Newmont Mining Corp. of Denver a coveted Battle Mountain gold and copper development south of the Northern Nevada town of Battle Mountain.

The agreement calls for Battle Mountain shareholders to receive 0.105 of a share of Newmont stock in exchange for each of their 230 million shares. Newmont will also assume some $363 million in debt and other liabilities.

King alleged Battle Mountain's directors breached their duties to maximize shareholder value by failing to adequately evaluate Battle Mountain's worth and enhance its value as an acquisition candidate and to create "an active and open auction" for the company.

"We've looked at the stock exchange ratio, and calculated that after the transaction, Battle Mountain shareholders will end up owning 14-15 percent of the combined company," said Jeff Smith, one of the plaintiff's New York-based attorneys. "But the annual production, earnings and sales figures indicate shareholders should get a better share of the combined company."

"Battle Mountain had 18.4 percent of what would be the combined companies' gold production in 1999 versus 21.8 percent in 1998. (Battle Mountain's share of) the combined companies' sales would be 15.9 percent in 1999 as opposed to 18.8 percent in 1998. Those figures are above the 14 percent that the shareholders would own, so that indicates the acquisition price is on the low end," he said.

Gregory Nespole, the plaintiff's New York-based attorney, also complained about Noranda Inc. voting its 28 percent stake in Battle Mountain for the merger. Noranda's CEO is on the Battle Mountain board of directors.

"There's a 28 percent lock-up on the price of the stock because that's owned by Noranda ... so that limits the ability of shareholders to receive the highest value for the stock," Nespole said.