Perth-based Perilya Ltd and Sydney-based CBH Resources Ltd have announced a $489 million merger deal to form a globally significant producer of lead and zinc.
Perth-based Perilya Ltd and Sydney-based CBH Resources Ltd have announced a $489 million merger deal to form a globally significant producer of lead and zinc.
The board of CBH has unanimously recommended that its shareholders accept the merger, in the absence of a superior proposal. CBH's largest shareholder, Japan's Toho Zinc Co has given its support to the merger.
Toho holds around 25.5 per cent of CBH shares and 25.5 per cent of CBH notes.
Under the proposed merger, which values CBH at $333 million on an enterprise value, Perilya will acquire all of CBH ordinary shares and convertible notes. The combined equity value of the merged company will be $489 million.
CBH shareholders will receive one Perilya ordinary share for every three CBH shares they hold and one Perilya option for every 20 CBH shares.
The companies said this provided CBH shareholders with a 27 per cent premium to CBH shareholders on the volume weighted average of the companies' trading prices for the month leading up to March 19.
In a conference call earlier today, Perilya chairman Patrick O'Connor repeatedly stated the merging of both companies makes for "compelling logic".
"The merger of the two companies is a logical development and a historic step that will unify the ownership of the Broken Hill mining district for the first time in its approximate 130 year mining history," Mr O'Connor said.
The merger will allow the rivals to combine their neighbouring Broken Hill lead and zinc mines, which CBH chief executive Stephen Dennis said will bring unit costs down by around an estimated $1.50 per tonne via an increase in ore processing from the current 1.8 million tonnes per annum up to 3Mtpa.
The companies said the combined group would have a more diversified production base through multi-mine operations at Broken Hill, Endeavor and Flinders and would have a strong development pipeline including the Panorama and Mount Oxide projects and the Hera deposit.
However Perilya will not acquire CBH's interest in the Mineral Hill, Sorby Hills or Constance Range projects and certain other assets, which will be separated into a new entity to be known as Kimberley Metals.
The makeup of the board will consist of four people from Perilya and three from CBH, with Mr O'Connor to become chairman of the combined group if the merger proceeds and Mr Dennis will take the role of chief executive.
However one glaring omission from the merged company is current Perilya chief executive Len Jubber.
"Len Jubber, the current CEO of Perilya, will step down from his current role and will not have a role in the combined company," said Mr O'Connor while thanking Mr Jubber on his efforts for revitalising Perilya.
When asked why Mr Jubber stepped down, Mr Dennis did not state a reason.
"All of us have had to make the right decision in allowing this transaction to come together because of the very compelling logic on the ground," Mr O'Connor said.
Perilya's share market performance over the last eight months saw its shares reach a closing high of $5.33 at the end of July and its last traded price at time of publishing of $1.13.
Additionally Mr O'Connor said it was likely that the head office of the combined group will reside in Perth, however it was too early to tell.
