PERTH (miningweekly.com) – Uranium developer Deep Yellow on Friday revealed that an attempt at a merger with fellow-listed Vimy Resources, had been rebuffed.
The ASX-listed company revealed that it had submitted a binding proposal to Vimy to acquire the company in a share trade, offering one fully paid Deep Yellow share for every 3.74 Vimy shares held, representing an offer price of 30.25c a Vimy share, and representing a 10% premium to Vimy’s closing price on November 18.
Deep Yellow said on Friday that the proposal envisaged a ten business day due diligence period and standard terms and conditions.
“Disappointingly, the Proposal was not accepted; nor was there, in Deep Yellow’s view, meaningful engagement by Vimy. Importantly, Deep Yellow believes key major shareholders of Vimy would understand the significant value accretive opportunities through combining both companies and would be supportive of the merger,” Deep Yellow said in a statement.
“Deep Yellow firmly believes that the Proposal submitted to Vimy had real potential to deliver benefits to all stakeholders based on current market conditions and the advantages of creating a consolidated uranium entity.”
“The underpinning rationale for the consolidation of Deep Yellow and Vimy was to capitalise on the potential to build the next Tier-1 uranium producer and drive efficiencies, by increasing scale and scope for ongoing investment in exploration and development of the combined uranium portfolio, to the benefit of all stakeholders,” said MD and CEO John Borshoff on Friday.
“The merger would have delivered to Vimy’s projects an experienced technical team of proven uranium mine builders, able to expedite the development of Mulga Rock. Completion of the merger would have achieved the market consolidation we consider necessary to establish as a first step, a company with significant size and scale to create a leading Tier-1 uranium producer, well positioned to supply a growing uranium market.
“Based on publicly available information, Deep Yellow believes its merger proposal would have delivered fair value to Vimy shareholders and I am very confident that the strength of our combined management teams and employees would have driven efficiencies to the benefit of all stakeholders.”
However, Vimy on Friday said that the unsolicited takeover offer was unconventionally structured, and offered a non-market premium.
The company said that the proposal required Vimy to accept the offer within 72 hours and sign a binding merger term sheet and make a public announcement, without Vimy having done a due diligence on Deep Yellow.
The proposal also committed Vimy to exclusivity with a A$3-million break fee liability.
Furthermore, the junior compnay noted that while the proposal was labled a “merger of equals”, it was for the acquisition of all of the shares in the coampny, while only implying a 10% premium to Vimy’s last closing price, which the board deemed did not reflect an appropriate control premium.
Additionally, the merger would have left Vimy shareholders with only a 43% interest in the combined company, which the Vimy board felt should be materially higher.
“The Vimy board assessed the unconventionally structured proposal and found it deficient on many points. Expecting any board to sign a binding merger term sheet within 72 hours of receipt with exclusivity and break fee liabilities without due diligence is unrealistic and uncommercial,” said Vimy chairperson Cheryl Edwardes.
“The Vimy board is committed to maximising value for our shareholders and are open to engaging with all parties in a professional and respectful manner, including Deep Yellow, under appropriate confidentiality arrangements to create a level playing field for all parties that have interest in a corporate transaction.”
The company expressed its disappointment that Deep Yellow has announced the lapsed proposal, despite Vimy’s offer to engage privately in good faith to explore a ‘meaningful and value led’ transaction.
Vimy this week announced a strategic review of its business to assess opportunities to rapidly build its capacity and de-risk its Mulga Rock project, in Western Australia, after fielding what it called 'unsolicited approaches from a number of parties'.