Shares in struggling gold miner St Barbara (ASX:SBM) lost more than 3% in value yesterday afternoon after it said ‘no’ for a third time to a buyout proposal for its Leonora gold assets from the persistent Silver Lake Resources (ASX:SLR).
The struggle for ownership of the poorly performing Leonora gold assets of St Barbara has become a soap opera in the WA Goldfields that go away.
St Barbara shares ended at 58 cents, down 3.3%. Shares in its adversary Silver Lake rose 2.4% to $1.06, while the third party in this threesome, Genesis Minerals, saw its shares edge up to 0.8% to $1.19.
Silver Lake had pitched a third buyout offer last Friday, offering more cash in a new version of its proposal. The revised proposal comprised 327.1 million shares, and Silver Lake increased its cash consideration from $326 million to $370 million, matching the improved offer from Genesis.
Silver Lake’s proposal equates to a total consideration of $722 million, an increase of $15 million from the company’s prior offer.
After telling the market on Monday they would look at the new offer, St Barbara’s board issued a statement on Tuesday afternoon saying ’no’ to Silver Lake.
“St Barbara notes that while the Revised Non-binding, Indicative and Conditional Proposal contemplates additional cash which would support the liquidity of St Barbara going forward, the proposal remains non-binding and unacceptably conditional and contrasts to the fully documented, fully financed and shareholder-supported Binding Genesis Transaction,” the statement read.
“This conditionality will remain even in the event that Silver Lake ultimately provides a binding proposal, as it will still be subject to Silver Lake shareholder approval.
“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.
“In this situation, the Silver Lake transaction would become an “option” for Silver Lake, with St Barbara shareholders entirely exposed to the outcome of the Silver Lake shareholder vote and the potential failure to satisfy any other remaining conditions precedent,” St Barbara claimed.
“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,” St Barbara directors said on Tuesday.
“Further, 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.
“This is exacerbated by the lack of synergies, and therefore value creation in the Leonora province, based on Silver Lake’s portfolio. The lack of substance associated with the Revised Non-binding, Indicative and Confidential Proposal is also indicated by the fact that it is stated to express “current intentions only and is not intended to constitute, and does not constitute, an offer capable of acceptance or otherwise give rise to a binding contract.” (St Barbara’s emphasis).
In the statement, St Barbara chair Kerry Gleeson said “The Binding Genesis Transaction is fully and definitively documented, fully funded by a committed $400m capital raising, not subject to due diligence, supported by a $25m deposit and has received indications of support from around 49% of Genesis’ register.
Silver Lake’s latest proposal would still require termination of the Binding Genesis Transaction before the satisfaction of conditions attached to the Silver Lake proposal, including a Silver Lake shareholder vote.
“Silver Lake was given the opportunity to make a non-binding indicative offer in September last year and it did not do so.
“Instead Silver lake has waited until the eleventh hour to demand that St Barbara entertain a disruptive and unrealistic two week due diligence exercise without any indication that Silver Lake shareholders would ever approve the proposal themselves.”
St Barbara also warned that should the Genesis transaction ended and the $25 million deposit lost then “St Barbara is likely to again breach debt covenants at 30 June 2023 and with the transaction uncertainty will lose the basis of the waiver of the 31 December 2022 covenant breach; and (the) Workforce uncertainty can be expected to create additional operating pressures at Leonora in particular.”