Australian gold miner St Barbara has entered into an agreement to acquire Canadian company Atlantic Gold for C$722m ($536m) in an all-cash deal through its wholly-owned subsidiary Nord Pacific.
The addition of a low-cost asset is expected to diversify St Barbara’s production base.
The Canadian low-cost gold producer owns and operates Moose River Consolidated in Nova Scotia, Canada.
Moose River consists of one producing open-pit, the Touquoy project, and three others currently under development: Beaver Dam, Fifteen Mile Stream and Cochrane Hill.
Under the agreement, St Barbara will acquire all outstanding Atlantic shares at an all-cash offer price of C$2.90 per Atlantic share, representing a total equity value of C$722m (A$768m) and a total enterprise value of C$802m (A$854 M).
The C$2.90 a share represents a 39% premium to Atlanta Gold’s closing price on Tuesday.
The transaction does not include Atlantic’s 36% interest in Velocity Minerals, which will be spun out to existing Atlantic shareholders after completion of the acquisition.
St Barbara intends to mobilise approximately A$490m ($340m) through an underwritten pro-rata accelerated non-renounceable entitlement offer to part-fund the transaction. The balance will be funded via the company’s existing cash reserves.
The company has also secured a new committed A$200m three-year revolving loan facility with Westpac Banking to support the combined company.
Upon completion of the transaction, Atlantic and its associated entities will become part of St Barbara’s corporate structure, and company director Steven Dean, currently chairman and chief executive officer of Atlantic, will be invited to join the St Barbara Board.
St Barbara intends to retain key Atlantic executives who will continue to work for the development of Moose River, as well as the current operating team.
A termination fee of C$25m will be payable if either party fails to satisfy a condition precedent or if either party stops supporting the transaction.
Subject to customary commercial conditions, including court approvals, successful Atlantic Gold shareholder vote and regulatory approvals, the transaction is expected to close in July 2019.
St Barbara was advised by Deutsche Bank, with Ashurst as Australian legal counsel and Fasken as Canadian legal counsel.
The company will also make an Institutional Entitlement offer to eligible institutional holders and a Retail Entitlement offer to eligible retail holders.
The closing date for the receipt of Entitlement and Acceptance Forms is 4 June 2019.