St Barbara has rejected Silver Lake’s latest Gwalia gold mine bid, suggesting it will not deal with a Genesis rival on any terms.
Silver Lake added another $44m in cash to its bid for Gwalia late last week, bringing the cash total up to that of rival bidder Genesis Minerals, and arguing the full value of the offer now represents a 16 per cent premium to that of Genesis’ offer.
But after consideration over the last four days, St Barbara on Tuesday knocked back the revised Silver Lake pitch citing share price falls in the wake of earlier offers, and the fact that Genesis has already locked away a $400m capital raising to back its own bid for the Leonora gold assets.
On Friday, Silver Lake upped its offer to $370m cash and 327.1m of its own shares – valued at $352m at Friday’s closing price of $1.075, for a total price of $722m.
Since then its shares have fallen about 3.7 per cent to trade at $1.035 at 1300 AEST.
Genesis shares were down 6 per cent to $1.16 at the same time, however, lifting the relative value of Silver Lake’s offer since it lodged its revised bid after the close of market on Friday.
In response to the latest bid, St Barbara chair Kerry Gleeson said the additional time that would be required to close any deal with the rival miner – including cancellation of meetings over the Genesis offer and the organisation of a Silver Lake shareholder vote – had led to rejection of the bid.
In a statement to the market on Tuesday, St Barbara effectively told Silver Lake its board was not prepared to consider an alternative to the Genesis deal on any terms, opting for the certainty of the cash in front of the company rather than engage with a deal that even the company admits is at least a 10 per cent bump on the Genesis offer.
St Barbara’s latest argument is that it is not confident Silver Lake shareholders would support its offer for the assets, given the company’s shares have fallen almost 20 per cent since the company’s first approach in early May.
“Critically, the revised non-binding, indicative and conditional proposal requires St Barbara to terminate the binding Genesis transaction (and lose the associated $400 million Genesis capital raising) at a time when Silver Lake’s proposal is conditional on, at a minimum, a Silver Lake shareholder vote,” the company said.
“No indication of Silver Lake shareholder support has been provided by Silver Lake (notwithstanding St Barbara’s written request), and St Barbara has no basis for expecting that Silver Lake can deliver a satisfactory level of certain shareholder support in the time available.
“For St Barbara to decide to place the binding Genesis transaction at risk, St Barbara would need to have overwhelming confidence that Silver Lake’s Revised Non-binding, Indicative and Conditional Proposal would complete on the terms proposed. Despite St Barbara’s requests, Silver Lake has not provided any reasonable basis, quantitative or otherwise, to support how it has derived its offer price for the Leonora assets.”
Last week Genesis said it had received indications of support for the deal from about 49 per cent of its register – although the company did not indicated which funds had indicated their support for the deal, nor how that support had been conveyed.
St Barbara’s board has resisted Silver Lake approaches since the Luke Tonkin-led company ambushed its friendly sale deal with Genesis in early May, arguing the premiums on offer from Silver Lake were not material enough to warrant breaking the “no talk, no shop, do due diligence” clauses in its deal with Genesis.
St Barbara has also argued Silver Lake’s requirement for two weeks’ access to its books for due-diligence investigations would put too much pressure on its timeline to complete the Genesis deal, potentially risking the company’s solvency if no binding offer eventuated – an argument rejected by Silver Lake.
Genesis shareholders are due to vote on the deal on June 18, with St Barbara holders due to consider the proposal on June 20.
Silver Lake has already won the support of major St Barbara L1 Capital, and the latest rejection is likely to inflame tensions between the struggling gold miner and its 9.3 per cent shareholder, which has already indicated its intention to vote against the Genesis deal in June.
Both St Barbara and Genesis need the support of half of shares voted at their respective meetings to conclude the deal.