August 19, 2009 / 6:40 PM / 10 years ago

UPDATE 2-Industry Canada attention hits Forsys deal, stock

* Industry Canada letter raises questions about takeover

* Shares fall 13 percent (Adds comments from Forsys CEO)

TORONTO, Aug 19 (Reuters) - Shares of Forsys Metals Corp (FSY.TO) skidded 13 percent on Wednesday, as a letter by Industry Canada apparently delaying the company’s planned takeover by holding company George Forrest International Afrique threw a chill into shareholders.

But the chief executive of Forsys, a uranium developer based in Canada but with operations in Namibia, said he suspected the letter may simply be a formality and does not necessarily indicate that Ottawa will hold up the deal.

The C$579 million ($526 million) takeover was originally supposed to close in February, but has been delayed as George Forrest (GFI) has sought more time to gather and transfer funds.

In a statement on Wednesday, Forsys said George Forrest had provided it with a letter from Industry Canada stating that “GFI is prohibited from implementing the investment pending further notice from Industry Canada”.

Forsys shares closed down 82 Canadian cents at C$5.40 on the Toronto Stock Exchange.

Duane Parnham, CEO of Forsys, said he suspects Industry Canada is merely reviewing the transaction because the deal’s size is above the current C$312 million threshold.

He said he has fielded questions throughout the day from shareholders and industry players concerned that the transaction may be held up.

“To me it just seems like ... somehow Industry Canada got twigged of this transaction without understanding the nature of the transaction and put out a simple letter saying ‘you can’t do anything until you talk to us’,” he said.

Some analysts have also raised questions about GFI’s source of funding and the identity of its possible partner in the transaction.

Parnham said he is not involved in that process.


Canada has foreign investment restrictions on certain sectors, including uranium, and the government last year blocked the sale of satellite technology company of Macdonald, Dettwiler and Associates MDA.TO to U.S. rocket-maker Alliant Techsystems ATK.N.

But Parnham noted that Forsys, like many resource companies, has only a handful of employees in Canada and operates assets far afield, in this case in Namibia, where the company is developing the Valencia uranium project.

He said GFI has told him it has requested more information from Industry Canada.

The government department said late in the day that it would not comment on the press release issued by Forsys.

GFI is based in Belgium but operates in Africa. Is is controlled by entrepreneur George Forrest.

$1=$1.10 Canadian Reporting by Cameron French; editing by Rob Wilson

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