Ahab's  Instablog

The takeover of Frontier Gold by Newmont is described as a 'friendly' takeover which presumably means in this case that management will not suffer the rationalization that might be a normal economy when a company comes under new ownership. It certainly does not describe the deal for most shareholders who will be paid cash to give up their interest in the major assets of the company; Northumberland, Sandman and Long Canyon, of which Newmont claims of their due diligence that "it has the potential to be three or four times bigger than Frontier's present resource estimates", and "their portfolio will be enhanced by the acquisition of this 'best in class' asset."
Their financial advisors RBC Capital claim the offer is fair to shareholders from a financial point of view. Which may be true if you had intended to sell on a dip -
the transaction was announced with a high premium to a closing price the day after the bottom of a short but sharp engineered sell-off of the entire precious metals complex. Had it been calculated over an average price for the previous 4 weeks say it would have been far less attractive and with the subsequent recovery the offer is barely over the trend line, while the share price has of course stalled against the rest of the recovering market. At the present rate it could be a fine bargain by the time they get around to completing the deal and shareholders receive their funds.
Although (ex) shareholders will retain an interest in the spin-off Pilot Gold, the history of these in my own experience has been very uninspiring, which is not surprising if you simply look at the number of small exploration companies versus the number which make important discoveries in a mining-friendly jurisdiction and attain midcap status. Since experts like Sprott and Embry with all their contacts and resources only hit the jackpot about one out of five, the question arises as to what will the ex- shareholder do with the cash left after the time lag and capital gain event which will probably be initiated in most portfolios.
Furthermore as it is basically a cash deal the argument for the 85 million dollar break fee is very weak - it basically nobbles any competing bids which would obviously be in the shareholder's interest.
Unfortunately most institutional shareholders grab these opportunities to lift their quarterly performance a few points against their competitors but management itself is the biggest argument for acceptance - corporate governance is so difficult to unseat that even Warren Buffet walks away from a potential acquisition run by an undesirables.
(the author is long FRG and intends to maintain his position)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.