A potential merger between gold miners Centamin (CEY) and Endeavour Mining has edged a little closer after the former finally started talking to the latter and agreed to conduct due diligence.
But there is still a rocky path ahead, after Centamin accused Endeavour of stalling on talks.
Canada-based Endeavour is proposing to merge with Centamin, offering 0.0846 Endeavour shares for every Centamin share, implying a value of 118p per Centamin share.
Endeavour confirmed its chief executive Sebastien de Montessus met with Centamin chairman Josef El-Raghy in Perth, Australia on Saturday to discuss the merger.
They both agreed to conduct due diligence, but Endeavour said the scope and timetable need to be decided.
ENDEAVOUR REFUSED EXTENSION
Thanks to the public announcement it made at the start of the month, under English takeover law Endeavour triggered an automatic and mandatory deadline of 31 December to either announce a firm intention to make an offer for Centamin, or announce it doesn’t intend to make an offer.
Centamin has asked Endeavour for information key to assessing the value of the deal, such as information about its financial model, but Endeavour has refused to provide this unless it is given an extension to the deadline to make an offer.
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However, the FTSE 250 miner has today said it won’t grant an extension unless Endeavour gives it the information it has requested.
Shares in Centamin are up 0.% to 118p on its latest announcement.
CENTAMIN SHOULD ‘GRANT MORE TIME’
But analysts at Berenberg have called on Centamin to give Endeavour more time.
They believe a merger ‘makes sense operationally and strategically’, but that the numbers do not currently stack up, forecasting that the deal would have a negative impact on Endeavour’s earnings per share and free cash flow per share.
Berenberg adds, ‘In our view, Centamin needs to agree to extend due diligence to allow Endeavour to complete its work and better communicate the merits of the deal to the market, which it is currently unable to do, so that it can display the financial merits and accretion of the transaction rather than just the strategic fit.’
