March 14, 2011
/PRNewswire/ -- Capital Gold Corporation (Amex: CGC) (TSX: CGC) ("CGC") announced today that ISS Proxy Advisory Services and Glass Lewis & Co., the two leading independent proxy research and advisory firms, have both published reports recommending that Capital Gold's stockholders vote
the merger with Gammon Gold Inc. ("Gammon"). A special meeting of the Capital Gold stockholders to vote on the merger proposal will be held at
March 18, 2011
at the offices of Ballard Spahr LLP, located at 1735 Market Street, 51st Floor,
"We are pleased that both ISS and Glass Lewis, having thoroughly evaluated the terms of the merger agreement with Gammon as well as the proposed offer from Timmins Gold Corp., have reached the same conclusion as the Capital Gold board of directors and the independent special committee and recommend that stockholders vote in favor of the Gammon merger," said
, Chairman of the Board of CGC. "Their recommendations further validate our view that the Gammon offer is in the best interests of CGC stockholders and we urge all stockholders to vote in favor of the Gammon merger."
The ISS analysis cited "…the board's evident attention to opportunities for maximizing shareholder value, and the superior market value of the merger consideration being offered" in its recommendation to CGC stockholders to support the Gammon merger. ISS also examined the long term potential benefits to stockholders, saying that "…Gammon's stronger cash position and positive operating cash flow would appear to provide Capital Gold with the funding it requires to develop and expand its operations. Gammon's new management team – now in office for approximately three years – also has experience that Capital Gold will need to leverage as it develops its underground mining operations at the recently-acquired
Furthermore, Capital Gold stockholders will gain greater exposure to silver prices through the combined company's ownership of the
ISS considered the poor performance of Timmins' stock since it announced its proposal, stating, "[o]n
March 9, 2011
, Timmins filed a Form 425 stating that its offer was superior "[b]ased on the average of the respective closing share prices for the last 60 trading days." Although this is technically true when based on this long trading window… Timmins' stock price has actually deteriorated, in constant US dollars, while Gammon's – already in US dollars – has become more attractive."
In arriving at its conclusion, ISS reviewed the reports of several prominent research analysts that follow the mining sector, quoting some of these as follows: "[i]n their opinion of the two transactions on
Feb. 15, 2011
, Octagon Capital noted that Gammon appeared to be the better choice due to the exposure to silver prices and the increased opportunities in
that would arise from the more established Gammon". Scotia Capital also found the Gammon/Capital transaction to be a good fit from Gammon's perspective and remained skeptical of the Timmins transaction. Analysts at Macquarie Equities Research noted that the strong performance of Gammon's stock may have been driven by the recent rise in silver prices and higher expectations about its exploration program. The analysis of the beneficial effects of silver exposure echoes management's belief that Gammon will provide a more diversified production base for the combined company.
In reaching its recommendation, Glass Lewis stated that, "...the Gammon deal is superior to Timmins' offer in almost every aspect", and found, "…Gammon's stock to be far superior to Timmins' stock as a form of currency in executing a transaction." Glass Lewis concluded with saying, "[i]n sum, given our determination that the Gammon transaction is superior to Timmins' offer, our approval of the board's sale process in general, our view that the implied purchase price is fair to shareholders, and the unanimous support of the board, we believe the proposed acquisition by Gammon is in the best interests of shareholders."