ENDEAVOUR Mining has terminated merger discussions with Centamin – which operates the Sukari gold mine in Egypt – so dropping the “possible all-share offer” it announced on December 3 to take over the company which was flatly rejected by the Centamin Board.
Endeavour CEO Sébastien de Montessus said in a statement released to the London Stock Exchange today that: “The quality of information received during the accelerated due diligence process has been insufficient to allow us to be confident that proceeding with a firm offer would have been in the best interests of Endeavour shareholders.
“We remain convinced about the strategic rationale of combining Endeavour and Centamin to create a diversified gold producer with a high-quality portfolio of assets.”
Endeavour’s strategic pitch was that Centamin operated only a single asset – the Sukari mine which was under-performing – and the company’s shareholders would be far better off if they were part of a diversified group with several mines operating in different locations. Endeavour operates four mines in two countries – Côte d’Ivoire and Burkina Faso.
That was rejected out of hand by the Centamin board on December 4 which said the offer “… is skewed in favour of Endeavour’s shareholders and fundamentally undervalues Centamin”.
The Centamin board said most of the cash flow in the merged group would come from the Sukari mine and that its shareholders would be penalised by Endeavour’s high debt levels. The Board pointed out that: “Whilst Centamin had cash and liquid assets as at September 30 2019 of $289m and no debt, Endeavour had gross debt and financial obligations of $729m and net debt of $599m as at September 30 2019 and financial liabilities related to hedging and streaming obligations.
“Therefore a significant portion of the cash flows derived from Endeavour’s assets will not accrue to shareholders.”
De Montessus responded to that in his statement today commenting: “We continue to be disciplined in relation to business development opportunities and remain sensitive to dilution of our shareholders given the significant improvement in our business over the past four years.
“Following a period of significant investment our business is now well-positioned to generate significant cash flow as demonstrated with our net debt reduction of $52m in quarter three – 2019 and a further (reduction) circa $77m in quarter four – 2019.”
In terms of rule 2.8 of the UK Takeover Code, Endeavour may not make another offer for Centamin for six months except under certain conditions.
These include: agreement from the Centamin board; a third party announcing a firm intention to make an offer for Centamin; Centamin announcing a “whitewash” transaction or a reverse takeover and/or a material change of circumstances – as determined by the Takeover Panel.