In a significant development in the mining industry, Silvercorp Metals has put forth an off-market takeover bid to acquire the remaining shares of OreCorp for a total value of A$276.5 million. This move, announced by OreCorp on December 27, 2023, aims to consolidate Silvercorp’s position in the mining sector by gaining full ownership of OreCorp.
The terms of the acquisition offer an intriguing mix of stock and cash. Each OreCorp shareholder is set to receive 0.0967 common shares of Silvercorp and A$0.19 in cash for each share they hold. This arrangement values each OreCorp share at A$0.5891, representing a significant premium over the company’s previous market value. Specifically, this price is 40% higher than OreCorp’s 20-day volume-weighted average price (VWAP) as of August 4, 2023, and 22% higher than its 20-day VWAP ending on December 22, 2023.
Initially, the Tanzanian Fair Competition Commission (FCC) had granted unconditional merger approval to Silvercorp in November 2023 for acquiring control over OreCorp under a proposed scheme of arrangement (Existing Approval). However, following the announcement of this takeover offer, the FCC indicated the need to reassess the situation due to changes in circumstances between the original scheme and the new offer. Consequently, Silvercorp and OreCorp have been informed that a fresh merger approval might be required for this takeover bid to proceed.
In response to the FCC’s concerns, both OreCorp and Silvercorp have submitted the necessary documentation to seek the required approval for their offer. They are now awaiting the FCC’s decision. If the FCC does not confirm that the existing approval applies to the new offer, or if it fails to grant a new approval, one of the conditions of the takeover bid will remain unmet, potentially derailing the entire acquisition process.
The urgency and importance of this deal are evident in the collaborative efforts of OreCorp and Silvercorp to promptly satisfy the FCC’s requirements. Their previous interactions with the FCC during the scheme of arrangement have laid a foundation for a positive working relationship, which they hope will facilitate a smooth approval process.
The OreCorp Board has unanimously advised its shareholders to accept Silvercorp’s offer, barring any superior proposals. This recommendation is contingent upon an independent expert’s report confirming the fairness and reasonableness of the offer to OreCorp’s shareholders.
This acquisition is particularly noteworthy as it highlights the dynamic nature of the mining industry, where mergers and acquisitions are often strategic moves to consolidate resources and strengthen market positions. For Silvercorp, acquiring OreCorp means gaining a more significant foothold in the lucrative mining sector, particularly in East Africa. OreCorp’s assets, including the Nyanzaga gold project in Tanzania, are of considerable interest in this context.
The unfolding scenario presents a complex interplay of corporate strategy, regulatory oversight, and market dynamics. The FCC’s decision will not only determine the fate of this particular acquisition but also set a precedent for future mergers and acquisitions within Tanzania’s mining sector. The situation is being closely monitored by industry stakeholders, who are keen to understand how regulatory bodies balance the interests of corporate ambitions with the need for fair competition and market stability.
As the mining sector continues to evolve, transactions like the Silvercorp-OreCorp deal underscore the importance of regulatory frameworks in guiding corporate actions. The outcome of this situation will offer valuable insights into the workings of such frameworks and their impact on business strategies in the mining industry. The decision by the Tanzanian FCC will be a pivotal moment for both companies involved and could potentially influence future corporate strategies in the region’s mining sector.
