For the last two week, Centamin (LON: CEY) have been hitting news headlines as the firm has been subject to a takeover bid from rival Endeavor Mining.
On December 3, news broke out globally that Centamin had been subject to a hostile takeover bid following a merger approach from Endeavour.
The firm saw their shares spike almost 8% on the announcement, which got shareholders licking their lips.
When this update hit news, Centamin seemed to firmly reject the prospect of a potential takeover, saying that the bid submitted did not value Centamin.
In a response to the £1.47 billion, all share combination proposal, Centamin said that it is ‘better positioned’ to deliver shareholder returns on a stand alone basis than a combined entity, leading to a unanimous board rejection.
The offer values Centamin at £1.47 billion and proposes a share-exchange ratio of 0.0846 Endeavour share for each Centamin share.
If the merger offer to go ahead, Endeavour shareholders would own just shy of 53% of the new company, while Centamin shareholders would have just over a 47% stake, however Centamin rejected the prospect of this.
Endeavour explained: “As meaningful engagement has still not been forthcoming, Endeavour is today announcing the terms set out in its proposal in an effort to encourage the Centamin Board to engage in discussions.”
Endeavour added: “On November 28, Centamin responded to the proposal with a continued refusal to discuss the prospects for a merger or its terms prior to the execution of a standstill agreement and non-disclosure agreement.
“Mindful of Centamin’s response to Endeavour’s proposal in October 2018, Endeavour believes that Centamin’s insistence on a standstill agreement as a pre-condition to discussing the prospects for the Merger, or even preliminary terms which would be subject to reciprocal due diligence, risks denying Centamin shareholders a voice in the compelling strategic merits of a combination.”
The following day, Centamin announced to social media that the deal had been firmly rejected and that no offer was on the table following a unanimous board rejection.
Centamin gave shareholders reassurance that they would be looking to turn the business around after a tough few months of trading.
Centamin said the offer “materially undervalues” the company and it is “better positioned” to deliver shareholder returns on its own rather than teaming up with Endeavour.
However, Centamin said the proposal is “skewed in favour” of Endeavour, and “fundamentally undervalues” Centamin, which operates the Sukari gold mine in Egypt.
The company added: “Centamin regularly considers potential strategic opportunities and does so through the correct communication channels and with non-disclosure agreements in place in order to best protect shareholders’ interests. Centamin has communicated to Endeavour several times its willingness to engage on this basis and Endeavour has repeatedly refused to engage in a proper manner and allow the sharing of non-public information in order to better assess the value to shareholders of the potential combination.”
Centamin said that based on all information, the offer is simply not worth the proposal. Endeavour has been unable to “demonstrate that the logic of the proposal outweighs the risks to Centamin’s established policy of distributing significant cash returns to shareholders.
Whilst the deal was firmly rejected, it seems that Centamin Chair Josef El-Raghy was most skeptical of the deal saying the following comments.
“The board strongly believes that Endeavour’s proposal significantly increases financial and operating risk without any material benefits to our shareholders. Centamin’s stated strategy has always been to maximise returns for all of its shareholders, having returned approximately USD500 million to shareholders since 2014. In addition, despite numerous requests, Endeavour has refused to enter into a customary non-disclosure agreement to allow the board to further assess the proposal.”
El-Raghy concluded: “It is the board’s belief that the proposal made by Endeavour sits in stark contrast with Centamin’s strategy and we strongly advise our shareholders to take no action.”
On Friday, Centamin then announced the appointment of a new CEO which came at no surprise to both shareholders and the market.
Centamin seemed to have made an active effort to win the approval of shareholders and look to commence successful trading.
At this point, the deal between Endeavour and Centamin looked as if it had faded completed.
On Friday, Centamin said that Chief Financial Officer Ross Jerrard has been made interim CEO, following the departure of Andrew Pardey.
Centamin also announced the appointment of Jim Rutherford as a non executive director. e will then become deputy non-executive chair after 2020’s annual general meeting, when incumbent Gordon Edward Haslam departs.
Rutherford looked like a sound appointment, as he was currently holding a role as non-executive director at Anglo American plc (LON: AAL).
On Monday 16, lightning had seem to strike for Endeavour as it was reported that merger talks between the two firms had commenced.
After what seemed to be a stalemate, Centamin might have seen value in merging with Endeavour and talks commenced on Monday.
The merger values Centamin at around £1.47 billion, and Endeavour noted it has made several unsuccessful attempts at engaging with Centamin’s board.
The two have agreed they would both need to conduct due diligence, but Endeavour said the scope and timetable need to be decided. Endeavour has sent its own proposed timetable to Centamin, it noted.
Centamin, finally have given shareholders an update today saying that they were “disappointed” with Endeavour Mining Corp’s behavior as the two attempt to come up with a potential merger.
Endeavour pledged that shareholders of Centamin would get 0.0846 of an Endeavour share per Centamin share held, giving Centamin shareholders 47% of a combined company and valuing Centamin at GBP1.47 billion, as mentioned previously.
In the update on Wednesday, Endeavour have said that they will not provide information needed by Centamin to conduct due diligence.
This came as a response, when Centamin rejected the proposal by Endeavour to extend the deal deadline to 31st December.
Without Endeavour providing information that is core to the assessment of value, such as its financial model, Centamin cannot properly assess the proposed combination,” said Centamin.
“The Centamin board is disappointed that despite its efforts at constructive engagement, Endeavour has repeatedly refused to engage in a proper manner.”
“The unsolicited approach from Endeavour has created an intense period of uncertainty for all of the company’s stakeholders. Therefore, the board of Centamin believes Endeavour should, without further delay, enter into substantive reciprocal due diligence,” it continued.
Certainly, the deal will continue to take its twist and turns. The last two weeks have been extremely busy for shareholders of Centamin, with shares fluctuating up and down.
If the deal is concluded and wrapped up, then this could be a win-win situation for both firms, however it seems that there is still much to discuss and many more terms to be agreed between two parties.
Shares in Centamin trade at 118p (+0.98%). 18/12/19 19:06BST.
