VANCOUVER (CP) -- Eldorado Gold Corp. [TSX:ELD; AMEX:EGO] has launched a hostile takeover bid for Frontier Pacific Mining Corp. [TSX-V:FRP] valued at C$157 million, an offer Frontier has rejected as too low considering the "compelling" economics of its Perama Hill gold project in Greece.
Vancouver-based Eldorado, a gold explorer and producer active in Brazil, Turkey and China, said Monday it is offering 0.122 of a share for each share of Frontier Pacific.
Based on Friday's share price, the bid is valued at 90 cents per share or C$157 million.
Eldorado said the bid is a 28% premium to Frontier's closing price of 70 cents per share on the TSX Venture Exchange Friday.
"We believe the premium Eldorado is offering Frontier shareholders and the opportunity to participate in the benefits of a growing more liquid gold investment makes this an extremely attractive proposition for Frontier shareholders as well as Eldorado shareholders," Paul Wright, Eldorado's president and chief executive officer, said during a conference call Monday.
However, Vancouver-based Frontier said the proposal at its current price "does not represent fair value to the Frontier Pacific shareholders, considering the inherent value of the Perama Hill project as well as the value of Frontier Pacific's other assets."
"The overall economics of the Perama Hill project are extremely compelling and are not reflected in the proposed price," Frontier said in a statement Monday.
Frontier, which also has properties in Peru and Colombia, said it is "open to a business combination of Frontier Pacific and Eldorado at a fair price."
It also said its second-largest shareholder, Stewart Blusson, who owns about 14% of Frontier shares "does not support this unsolicited offer."
The deal requires approval of two-thirds of Frontier shareholders.
Eldorado said it has signed a lockup agreement with Frontier Pacific's largest shareholder, Dundee Precious Metals Inc. [TSX:DPM], which has agreed to tender its 25.5% interest. Eldorado also has a 2.9% stake in Frontier.
Eldorado also said it has had "various discussions with Frontier Pacific over the past several years" and told them about the offer on Friday.
Frontier shares were trading up nearly 33% Monday, rising 23 cents to 93 cents, suggesting shareholders are looking for a higher bid.
Meantime, Eldorado shares were down more than 3% or 25 cents to C$7.13 on the Toronto Stock Exchange.
"To me it seems like a smart deal for Eldorado," said Haywood Securities analyst Kerry Smith.
"Now they have to try to find a way to make it into a friendly deal."
(c) The Canadian Press 2008
