Billionaire Sawiris behind planned Endeavour-Acacia merger
Combined group would create a pan-African gold producer to rival Randgold Resources
Naguib Sawiris, the Egyptian billionaire who made his fortune building a telecoms empire extending from Algeria to Pakistan, is behind a deal to create a £3bn London-listed gold producer.
His family has a large stake in Toronto-listed Endeavour Mining, which on Friday revealed discussions with Acacia Mining, a fellow Africa-focused gold miner, over a “possible combination”.
They are pushing for a merger of the companies to create a pan-African gold company with the scale to rival Randgold Resources, London’s largest gold producer, according to sources familiar with the talks.
“On the face of it this appears a sensible African-focused fit,” said analysts at Investec. “A merged company would be of a similar production scale to Randgold.”
Acacia’s assets are in Tanzania, while Endeavour produces gold from mines in Mali, Ghana and the Ivory Coast. Combined, the two companies would have annual output of 1.5m ounces compared with the 1.3m ounces Randgold is expected to produce this year. Randgold is currently London’s largest listed gold miner with a market capitalisation of £6.29bn
Shares in Acacia rose 5.07 per cent to 439.6p on Monday, valuing it at more than £1.7bn, while Endeavour’s shares were down 0.48 per cent to C$22.72. It has a market capitalisation of about C$2.13bn.
Analysts said a merger of the companies was likely to garner support from institutional shareholders on both sides of the Atlantic providing the terms of the deal were sensible and did not favour one set of investors over another.
Acacia is 64 per cent owned by Canada’s Barrick Gold, but the company is believed to be willing to sell, having said its stake is noncore.
“The biggest weakness in Endeavour’s otherwise very robust investment case is the relatively short mine lives versus Acacia, Randgold and Centamin,” said Peel Hunt analyst Michael Stoner. “Acacia’s long-life Bulyanhulu mine is therefore likely to be the core asset around which the company is built.”
Still, one potential stumbling block is Canada’s tax law, which can make cross-boarder transactions tricky to pull off because it crystallises a capital gains liability. One solution, bankers said, would be a dual listing for the merged company and to issue a new class of exchangeable shares in Canada.
Endeavour is led by Sébastien de Montessus, a former Morgan Stanley investment banker in London who also worked for France’s Areva Group, the nuclear energy company.
He previously ran the Sawiris’ La Mancha Group, which in 2015 swapped a controlling stake in a mine for a 30 per cent stake in Endeavour and board representation. Mr de Montessus was named chief executive of the company in May.
Bankers said the chances of another suitor emerging for Acacia were low. “Everyone in the industry has had the chance to buy the Barrick stake if they wanted to,” said one mining banker.