Canada’s Endeavour Mining (TSX:EDV) gave markets a welcome break from COVID-19-related news by announcing the acquisition of smaller rival Semafo (TSX: SMF) in a C$1 billion ($691m) deal.
The transaction, the company said, will create the biggest
gold producer in Burkina Faso and Ivory Coast with production estimated in over
1 million ounces a year.
The West Africa-focused miner, owned by billionaire
Egyptian Naguib Sawiris, said the merger would bring together six mines with
strong cash flow into one portfolio, the opportunity to optimize assets and a
growth pipeline.
Endeavour shareholders will own about 70% of the combined
company, with Semafo shareholders holding the rest.
Under the deal, the target company’s shares will be
exchanged at a ratio of 0.1422 Endeavour shares for each Semafo share, which
represents a premium of 54.7% from the closing price of Endeavour and Semafo on
March 20.
La Mancha Holding, which has a 31% stake in Endeavour, has agreed
to invest $100 million in the combined company. Its interest, however, is
expected to drop to roughly 25% once the transaction is completed.
Endeavour and Semafo have previously worked as industry
partners and in early 2019 began a dialogue to evaluate the merits of a business
combination, but were unable to reach a deal. Talks resumed earlier this year,
the companies said.
Semafo’s shares have lost more than 50% of its value since early November, when a convoy of mine employees was attacked in eastern Burkina Faso, causing at least 37 deaths and halting operations at its Boungou mine.
The company had said it planned
to restart operations at the mine in the fourth quarter.