Genesis Swoops With Competing Offer for Vault
Regis considering its position after new offer deemed as superior
Genesis Minerals (ASX: GMD) has made a A$5.6 billion offer for Vault Minerals (ASX: VAU), potentially thwarting an earlier proposed merger of equals between Vault and Regis Resources (ASX: RRL).
The combination of Vault and Genesis has been long thought of as one of the more logical deals in the ASX gold space, given the proximity of the pair’s operations in the Leonora-Laverton district of Western Australia.
The two companies have history, having been involved in a drawn-out bidding war for St Barbara’s (ASX: SBM) Gwalia asset – which is now part of Genesis’ flagship Leonora operations – in 2023.
Genesis is offering 0.7629 of a share and A47.5c in cash for each Vault share held, implying total consideration of A$5.2741 per Vault share and valuing the company at A$5.6 billion.
It represents a premium of 14.5% to the implied offer price under the Regis merger proposal, 15.7% to the Friday closing price of Vault shares and a 17.2% premium to the last closing price of Vault on May 4, the day before the Regis merger was announced.
The total cash consideration of A$500 million under the proposed offer would be funded from a combination of Genesis’ existing cash and new corporate revolver facilities.
Genesis said the premia did not take into account potential synergies, valued by Genesis at around A$2 billion on a post-tax, undiscounted basis.
After assessing the proposal with their advisers, Vault said its board had deemed Genesis’ offer to be superior to the Regis merger.
Regis has until midnight WA time on July 13 to match the offer.
Regis acknowledged the Genesis offer and said it was considering its position.
‘Unique’ synergies
As well as around A$500 million of corporate and tax synergies, Genesis has forecast potential “unique” synergies over the next decade of around A$1.5 billion that could only arise due to the proximity of the two companies’ operations.
The enlarged Genesis would produce 600,000-700,000 ounces of gold per annum, all from 100%-owned WA assets, including 400,000-500,000ozpa from Leonora-Laverton.
Genesis said the transaction would allow ore from its Tower Hill project to be processed through Vault’s King of the Hills mill, avoiding the construction of the Tower Hill mill and expansion of the Laverton mill, which Genesis estimates would result in growth capital expenditure savings of A$715 million.
It would also unlock Genesis’ free-milling ore at its Bardoc assets via processing at Vault’s Mt Monger mill.
Genesis considers that there would be significant potential for additional synergies and operational flexibility which are yet to be quantified.
The enlarged Genesis would have a pro-forma market capitalisation of A$12.6 billion and pro-forma net cash of A$611 million.
Genesis shareholders would own around 59.8% of the enlarged company with Vault shareholders to own the remaining 40.2%.
Genesis intends to invite Vault chairman Russell Clark to chair the enlarged group with former Genesis chair Tony Kiernan to be deputy chair.
Kiernan recently stepped aside as chair to allow Raleigh Finlayson to move to executive chair.
Under the proposal, Finlayson would revert to managing director with newly appointed CEO Matt Nixon and long-time chief financial officer Morgan Ball to continue in their roles.
Genesis also intends to invite Vault directors Kelvin Flynn and Rebecca Prain to the enlarged Genesis board as the other nominees of Vault, while the remaining nominees of Genesis would be existing Genesis directors Gerry Kaczmarek and Jacqueline Murray.