Toronto-based Sprott Inc. announced on Wednesday that it’s making an all-share hostile takeover bid worth US$3.1 billion for rival bullion holder Central Fund of Canada Ltd.

The money management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

Sprott is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, says Sprott spokesman Glen Williams: “They weren’t interested in having those discussions.”

Sprott is using the courts to try to give shareholders of Central Fund’s 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in as that voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far.

“It is unusual to go this route,” says Williams. “There’s no specific precedent where this has worked.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund that the Spicer family controlled, after securing support from more than 96% of shareholder votes cast.

Central Fund’s shares are trading at a discount to net asset value, Sprott says, and a takeover by Sprott could unlock US$304 million in shareholder value.

Central Fund did not have any immediate comment on the unsolicited offer. Williams says Sprott had not yet heard from Central Fund on the proposal, but that some shareholders had already contacted the firm to voice their support.

Sprott’s existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.