Shore Gold, Kensington Resources to merge in stock deal worth more than $200M
11:14 PM EDT Sep 29
CRAIG WONG
VANCOUVER (CP) - Shore Gold Inc. and Kensington Resources Ltd. announced a plan to merge Monday in an all-stock deal worth more than $200 million that executives said could accelerate mine development for the diamond exploration firms.
"We now have a company that is larger in every sense, it's larger with its capital, it's larger with its pool of expertise and all of this will drive us to production a lot sooner," Kensington Resources CEO Robert McCallum told a conference call with analysts.
Under the deal announced Monday, Shore said it will offer 0.64 of a Shore common share for each share of Kensington. The offer puts a $3.49 value on each Kensington share, based on the Friday closing price of Shore shares at $5.45, the firms said.
Shore shares (TSX:SGF) lost 31 cents to trade for $5.14 on the Toronto Stock Exchange on Monday, while shares of Kensington (TSXV:KRT), which trade on the TSX Venture Exchange, were up 75 cents or about 30 per cent at $3.15.
Once the merger is completed, Shore will have about 145 million shares and the basic ownership split will be about 65 per cent Shore and 35 per cent Kensington.
Shore CEO Kenneth MacNeill, who will lead the merged company, said as separate companies Shore and Kensington often competed for limited resources.
"This merger puts both our shareholders in one very strong company," MacNeill said.
"Both companies are growing rapidly and have complementary staff and diamond properties. The long-term synergies of this merger lie in what we can do in the
Fort a la Corne district."
MacNeill said the new company plans to aggressively pursue the development of the Star property in northern Saskatchewan with their joint venture partners.
The Fort a la Corne diamond project in Saskatchewan is a joint venture among Kensington Resources, De Beers Canada Inc., Cameco Corp. and UEM Inc.
The combined company will have a cash position of about $175 million with no debt, the firms said.
Former BHP Diamonds Inc. president James Rothwell will be non-executive chairman of the combined board of directors, which will consist of five existing Shore directors and three Kensington nominees, including McCallum.
The merger arrangement must be approved at a special Kensington shareholder meeting expected to be held on or before Oct. 27. It is also subject to regulatory and court approval.
Kensington's board has unanimously approved the arrangement agreement and is recommending that security holders vote in favour of it.
Upon closing, Kensington's outstanding warrants and options would be replaced with Shore warrants and options with equivalent terms on the basis of the exchange ratio for common shares of Kensington under the arrangement.
The definitive agreement is not subject to a due diligence condition. Kensington and Shore have each agreed to pay a break fee of $7 million.
