Northern Financial Corp. has asked securities regulators in Alberta and Ontario to consider issuing a cease trade order in the proposed private placement by Proprietary Industries Inc. to Quest Capital Corp.

In the meantime, PPI has sent out an information circular seeking shareholder approval of a private placement to Quest for almost 15 million shares, and an issuer bid for 40 million shares. That meeting is scheduled for Nov. 2 in Calgary. The transactions are conditional on one another and will be voted on together in a single resolution. The transactions are also conditional on a number of other things, including receipt of all necessary regulatory approvals.

Northern says it believes that the Quest transaction is a takeover bid for all the PPI shares, with PPI and the Quest purchasers as joint actors, without having complied with the takeover bid provisions of securities legislation. Northern claims that the Quest transaction is also an insider bid for 100% of the PPI shares that has been disguised as a partial bid for 43% of the issued PPI shares.

Northern has made its own bid for 100% of the PPI shares and has filed and delivered its takeover bid circular. It claims that Quest is bidding for 100% of the PPI shares with the help of PPI and the Quest purchasers without having filed a takeover bid circular.

In response to Northern’s unsolicited takeover bid, a special committee and the board of directors have received a verbal opinion from Dundee Securities Corporation that the Northern offer is inadequate, from a financial point of view, to shareholders.

The board has determined that the Northern offer is not a superior proposal to the transactions being submitted for shareholder approval. It expects to mail a directors circular to shareholders by Oct. 12, which will explain its analysis and will contain a recommendation in light of Northern’s unsolicited bid. In the interim, the board strongly encourages shareholders not to tender any shares to Northern.

“Northern considers the Quest transaction to be abusive of the capital markets and we have requested a review of the Quest transaction by the securities commissions with a view to considering whether the Quest transaction should be cease traded,” said Vic Alboini chairman and chief executive officer of Northern.