Acacia Jumps in London on Talks for $4 Billion Endeavour Merger

JOHANNESBURG (Capital Markets in Africa) – Acacia Mining Plc jumped in London trading after the gold miner confirmed it is in early-stage talks with rival Africa-focused producer Endeavour Mining Corp. about a possible merger of the two companies which have a combined value of about $4 billion.

Acacia, which mines the precious metal in Tanzania, jumped as much as 7.7 percent to the highest since November 21. The stock traded at 435.1 pence a share at 8:54 a.m. in London, giving it a market value of about $2.1 billion.

After the close of trading in London on Friday, Acacia said it was in “discussions regarding a possible combination” with Endeavour. Bloomberg News earlier reported that day the companies were exploring a merger, citing people familiar with the talks. Toronto-listed Endeavour confirmed on Friday it had held discussions with Acacia that “may or may not result in agreement of a transaction.”

“On the face of it, this appears a sensible African-focused fit, with Endeavour’s longer term growth adding appeal to Acacia’s flat profile,” analysts from Investec Plc wrote in a note on Monday. “The companies are ungeared and a merged company would be of a similar production scale to Randgold.”

Randgold Resources Ltd. is the largest gold producer listed in London with a market value of about $7.7 billion.

A merger would allow Barrick Gold Corp. to reduce its 64 percent stake in Acacia, people familiar with the discussions said last week. A deal could enable Barrick to reduce its stake in Acacia to about 30 percent, one of the people said. Barrick would be likely to approve a deal, Investec said.

The transaction could be structured as a reverse takeover with Acacia buying Endeavour, and the combined company keeping its listing in London, the person said. The plans are not concrete and the structure may change, the person added.

Top-Five
Combined, the companies would be among the top five African gold miners by market value and ounces produced, according to data compiled by Bloomberg. Acacia, which produces gold from mines in Tanzania, has been looking to expand into new areas in Africa, with Chief Executive OfficerBrad Gordon naming West Africa as one of the most attractive regions.

The company was initially spun off from Barrick to support growth in Africa. Endeavour has operations in Mali, Burkina Faso, Ghana and Ivory Coast.

“Whilst at this point there is no indication of terms or price we believe that a combination would make sense from Acacia’s perspective as it would increase the group’s footprint into West Africa,” Numis Securities Ltd. said in a note to investors.

Gold producers are benefiting from a rebound in the price of the metal, which has helped push Acacia’s shares up about 160 percent in the last 12 months. Endeavour, which counts billionaire Naguib Sawiris as its largest shareholder, has gained about 230 percent in that period, valuing the Toronto-listed company at about $1.7 billion.