Yesterday, Centamin PLC (LON: CEY) saw their shares surge after the firm rejected a hostile merger approach from rival Endeavour Mining.
Today, Centamin have spoken with their senior board, and have given the market an update. The rejection from rival Endeavour will please shareholders about the resilient nature of the firm.
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.
Centamin became the latest London-listed gold miner to be an M&A target following a hostile £1.47 billion all-share combination proposal by Endeavour on Tuesday.
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”.
Centamin shareholders, under the current proposal, would end up with 47% of the enlarged company, but it said it would’ve contributed 100% of the free cash flow in the first half of 2019 and it would’ve also contributed all of the free cash flow in 2018.
Centamin also noted it has liquid assets of $289 million, and no debt, as of September 30, whereas Endeavour has gross debt of $729 million, with net debt of USD599 million.
Centamin Chair Josef El-Raghy said: “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.
“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.”
This week has been busy for competitors in the gold mining industry, as Greatland Gold saw their shares dip yesterday despite new reported discoveries in their Australian mines.
The decision made to reject the approach will please shareholders of Centamin, as the firm will now look to keep their performance in their own hands.
Following the update in October, where the FTSE250 listed firm saw its shares dip after the firm saw its output levels decline, there will be a keen emphasis to turn fortunes around and create optimism for shareholders.
Shares of Centamin trade at 128p (-0.35%). 4/12/19 11:52BST.
