Silver Lake Set to lift SBM offer

From today's Australian.

No due diligence required. Think as a shareholder l will vote against this.

At least no extra money being thrown in.


SILVER LAKE SET TO LIFT ST BABS OFFER

Silver Lake Resources appears to be digging in over its fight for the Australian assets of gold miner St Barbara, with the group set to announce improved terms of its offer on Wednesday.

DataRoom understands that the $990m Australian listed diversified gold producer will submit a new proposal for St Barbara’s Leonora gold mining operations, waiving the conditions of its financing being subject to due diligence.

Silver Lake earlier had Taurus Mining Finance providing $US150m of debt for its deal, which was subject to two weeks due diligence.

Now the requirement for due diligence to obtain the funding will no longer be the case.

It comes only days after Silver Lake threw another $44m on the table in a quest to force St Barbara into negotiations over the sale of the company’s Gwalia gold mine near Leonora.

St Barbara reject its advance, insisting the tie up it had earlier agreed with Genesis Minerals was in the best interest of shareholders and maintaining that it would not engage.

Yet St Barbara is under pressure to take the Silver Lake proposal more seriously, as shareholders including L1 Capital and Baker Steel Capital Managers, which hold 9.3 per cent and 8.6 per cent respectively, also pressure it to engage with the company.

The argument is that Silver Lake is acting now after attempting to engage with the company for months without any success, although St Barbara argues it did not ever engage meaningfully with Silver Lake in the past year.

The latest offer from Silver Lake lifted its cash component to $370m from $326m, while offering 327.1 million Silver Lake shares, as was the case earlier.

Factoring in the $5.4m break fee, the offer is worth $650m, the company said on May 23, which St Barbara argues is 10 per cent above the after-tax value of the deal from Raleigh Finlayson’s Genesis Minerals. Silver Lake argues the premium is 17 per cent excluding tax, transaction costs and break fees.

At that time, St Barbara justified its move, saying no improvement in the conditionality of the Silver Lake deal had been proposed.

It remained non-binding, in contrast to the fully-funded Genesis transaction.

It is conditional on a Silver Lake shareholder vote, which St Barbara says leaves it dependent on the shareholders support, and it argues the offer lacks synergies.

St Barbara is being pushed to execute on a transaction as it remains under pressure from its financiers as it will breach banking covenants on June 30 if a deal does not go through.

Those backing Genesis says Finlayson has the best skills to run St Barbara.

Additional reporting: Nick Evans