November 24, 2016 / 7:10 PM / in 2 years

UPDATE 1-Kirkland Lake shareholders vote for Newmarket takeover -sources

(Adds details of bid, quotes, background on company)

By John Tilak and Nicole Mordant

TORONTO, Nov 24 (Reuters) - More than 80 percent of Kirkland Lake Gold shareholders have voted in favor of the mid-tier miner’s takeover of Newmarket Gold, according to two sources familiar with the situation, marking the end of a contentious process.

Over 90 percent of the Newmarket shareholders who voted on the acquisition also backed Kirkland’s all-stock offer, valued at about C$1 billion ($741.34 million) when announced on Sept. 29, the sources said on Thursday on condition of anonymity as the matter is confidential.

Kirkland Lake shares were down 0.3 percent at C$7.34 on the Toronto Stock Exchange on Thursday, while Newmarket’s stock was up 0.3 percent at C$3.43. Silver Standard’s stock was down 0.3 percent at C$13.12.

The merger plan was briefly disrupted after it emerged that Kirkland Lake had rejected three joint offers from South Africa’s Gold Fields Ltd. and Canadian-based Silver Standard Resources Inc. to acquire it. The two withdrew their offer on Nov. 18.

Some investors had argued that Kirkland Lake too hastily rejected those offers. Other shareholders and analysts had publicly said the Kirkland Lake/Newmarket deal offered few synergies because Newmarket’s operations are in Australia while Kirkland Lake’s assets are in Canada.

Van Eck Associates, Kirkland Lake’s biggest shareholder with a holding of nearly 17 percent, was supportive of the deal, fund manager Joseph Foster told Reuters on Wednesday, reiterating their position from Nov. 5. He declined to specify how the fund had voted.

Kirkland Lake Chairman Eric Sprott, who owns 13.45 percent of Newmarket shares and 6.7 percent of Kirkland Lake stock, declared a conflict of interest in the deal.

An Oct. 28 Kirkland Lake circular states that Sprott recused himself from all of Kirkland Lake’s board deliberations, discussions or board voting on the Newmarket offer.

“The only way an interloper had a chance to intercede in this transaction was if a wedge could have been driven between Van Eck and Sprott, as their combined positions in Kirkland were effectively too large to overcome,” said Brad Allen, director of Branav Shareholder Advisory Services, which advises companies on corporate governance issues.

“With Van Eck’s recent statement of support for the original transaction, that wedge obviously didn’t occur,” Allen said.

To succeed, the deal required at least two-thirds of Kirkland Lake shareholders to vote in favor. It also required more than half of Newmarket shareholders to support it.

Both Kirkland Lake and Newmarket are holding meetings on Friday where shareholders can still vote in person on the transaction. But as is common, most shareholder votes have already been cast by proxy, meeting a Wednesday deadline.

Gold Fields said on Nov. 18 that it remains interested in talks with Kirkland Lake if the Newmarket deal is voted down. ($1 = 1.3493 Canadian dollars) (Reporting by John Tilak in Toronto and Nicole Mordant in Vancouver; additional reporting by Susan Taylor; Editing by Alan Crosby)

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