We expect a bidding war for Centamin
Centamin (CEY) 127.355p
Loss to date: 1.7%
Original entry point: Buy at 129.6p, 1 August 2019
Centamin (CEY) has urged its shareholders to ‘take no action’ after the FTSE 250 miner received an all-share merger proposal from Canadian gold group Endeavour Mining.
The proposal from Endeavour, which consists of 0.0846 of its shares for each Centamin share, values Centamin’s shares at roughly 126p each.
Endeavour argues a merger would create a diversified, ‘high quality’ portfolio of mines with potential for ‘improved operating efficiencies’ as well as a better possibility for share price and dividend growth.
Centamin has rejected the deal and believes it does not value the company highly enough.
The proposal has effectively fired the starting gun on takeover interest for the stock. Endeavour will not be the only company looking at Centamin and so we believe other takeover interest will soon appear.
Takeover activity among gold miners is widely expected to increase in the sector, particularly with the gold price stabilising at the $1,400 to $1,500 per ounce mark as global economic worries refuse to go away, making gold mining a lucrative sector at present. Takeovers would help miners increase scale.
Two big Canadian miners, Continental Gold and Detour Gold, have received offers in the past few weeks in deals worth nearly $5bn.
SHARES SAYS: Sit tight. Endeavour’s offer is just the start and could spark a bidding war.