Noront likely to hold to final Freewest bid; Delta faces challenges; Diedrich awaits next move

By Cristal Cody

Tupelo, Miss., Nov. 30 - Noront Resources Ltd. increased its hostile takeover bid on Monday for Freewest Resources Canada Inc. to C$222 million, or C$0.86 a share, to ward off Freewest's friendly deal with U.S.-based Cliffs Natural Resources Inc.

In other situations, Delta Petroleum Corp. said Monday that the independent oil and gas explorer and developer is considering strategic alternatives, including a sale of the entire company. That option has been expected since the company's borrowing base was limited earlier this year, analysts said Monday.

Also, the latest negotiation period for Peet's Coffee & Tea, Inc. to beat out a rival $32.00-a-share cash bid by Green Mountain Coffee Roasters, Inc. for Diedrich Coffee, Inc. was scheduled to expire on Monday.

Meanwhile, Wall Street closed up after the Thanksgiving Day break.

The Dow Jones Industrial Average added 34.92 points, or 0.34%, to close at 10,344.84.

The Standard & Poor's 500 index rose 4.14 points, or 0.38%, to 1,095.63, and the Nasdaq Composite index closed up 6.16 points, or 0.29%, at 2,144.60.

Noront works hard for Freewest

Under the new offer, Freewest shareholders will receive two shares of Noront for every seven Freewest shares and a five-year purchase warrant with a strike price of C$4.00.

Noront said this bid is its final price, and the tender offer will expire on Dec. 11. Noront also has waived conditions of its original bid terms, including the condition that at least two-thirds of outstanding shares be tendered in the offer.

Noront president and chief executive officer Wes Hanson said in a statement Monday that Freewest has ignored chances to negotiate terms of a deal since Noront first made a C$90 million takeover proposal on Oct. 2.

Toronto-based Noront is focused on nickel-copper-platinum-palladium, chromite, gold and vanadium discoveries in an area known as the "ring of fire," which is an emerging multi-metals district in Ontario, Canada.

Montreal-based Freewest reached a deal in November for Cleveland-based Cliffs, North America's largest producer of iron ore pellets for the steel industry, to acquire the company's chromite deposits in the ring of fire and spin off the remaining assets for about C$150 million in stock.

Chromite is a key component for the steel industry.

"On the one hand, the offer has brought Cliffs' interest out of the woodwork, so there is a win to get a senior mining company interested in the [ring of fire] belt," Michael Gray, an analyst with Genuity Capital Markets, said in an interview with Prospect News on Monday. "On the other hand, there is a consolidation premium if Noront can win this. They would control all the best deposits in the new emerging ring of fire."

Analysts expect Noront will stick to its word that this is the company's final offer, even if Cliffs raises its bid.

In that case, "it's certainly not the end of the world for Noront because of their gold-copper-nickel-platinum-palladium deposits," Gray said. "So if they lose this battle for Freewest, they still have retained value."

Cliffs is expected to increase its bid on the company's higher growth expectations.

David Khani, an analyst with FBR Capital Markets & Co., said in a research note released Monday to Prospect News that because domestic steel capacity utilization is "back in the 60%-plus range, we are becoming increasingly optimistic that CLF would be able to continue to use this leverage to lower costs and expand margins."

Freewest shares climbed 12 Canadian cents, or 18.75%, to C$0.76 on Monday.

Noront's stock rose 4 Canadian cents, or 1.78%, to C$2.29, while shares of Cliffs fell 1 cent, or 0.02%, in U.S. trading to close Monday at $44.06.

Delta ponders deal options

Denver-based Delta said Monday that it has retained Morgan Stanley and Evercore Partners Inc. to evaluate and advise the board on alternatives to enhance shareholder value.

"This will include, but not be limited to, exploring the sale of some or all of the company's assets, partnerships and joint venture opportunities, and the sale of the entire company," Delta said in the statement.

Delta, which focuses its oil and gas production in the Gulf Coast and Rocky Mountain regions, faces a tough environment ahead.

"Given that the banks had limited the company's spending and were basically driving the bus, the writing was on the wall in our view," David Tameron and Gordon Douthat, analysts with Wells Fargo Securities, LLC, said Monday in a research note released to Prospect News.

As previously announced by the company, under the Oct. 30 borrowing base redetermination, lenders had reduced the company's borrowing base to $185 million from $225 million and added a $20 million minimum availability clause.

Since Delta "has already been operating in a capital-constrained environment, and Q3 production fell by 10%, the next nine months will be very challenging for the company, in our view," the analysts said. "We note that the M&A environment for gas assets remains challenging given uncertain gas fundamentals near term."

Delta's stock closed down 1 cent, or 1.09%, at $0.91 on Monday. Shares have traded from $0.85 to $6.17 over the past year.

Diedrich waits for next bid

Emeryville, Calif.-based Peet's negotiation period for Diedrich was scheduled to expire on Friday, but Diedrich said that it extended the negotiation period through Monday.

Diedrich's board has said that Green Mountain's current bid is superior to the most recent cash-and-stock proposal of about $30.35 a share from Peet's.

The coffee company had agreed to be acquired by Peet's on Nov. 2 for $26.00 a share in cash and stock until Waterbury, Vt.-based Green Mountain pushed the bidding up to $32.00 a share in cash.

Irvine, Calif.-based Diedrich was founded in 1972 and went public in 1996. The company markets specialty coffees and is one of only four roasters under license to produce K-Cups for Keurig Inc.'s popular single-cup brewing system.

Diedrich shares lost 38 cents, or 1.13%, to close Monday at $33.12.

Peet's stock slipped 37 cents, or 1.12%, to $32.56.

Green Mountain shares rose 3 cents, or 0.05%, to $62.98.

Mentioned in this article:

Cliffs Natural Resources Inc. NYSE: CLF

Delta Petroleum Corp. Nasdaq: DPRT

Diedrich Coffee, Inc. Nasdaq: DDRX

Freewest Resources Canada Inc. TSX Venture: FWR

Green Mountain Coffee Roasters, Inc. Nasdaq: GMCR

Noront Resources Ltd. TSX Venture: NOT

Peet's Coffee & Tea, Inc. Nasdaq: PEET

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.