Iron ore developers Gindalbie Resources Ltd and Sundance Resources Ltd confirmed today they would not be proceeding with their planned $2.4 billion merger after shareholders and institutions rejected the concept.
Iron ore developers Gindalbie Resources Ltd and Sundance Resources Ltd confirmed today they would not be proceeding with their planned $2.4 billion merger after shareholders and institutions rejected the concept.
The merger, announced just one month ago, was designed to create a larger, diversified iron ore stock that would have more appeal to institutional investors.
However Sundance managing director Don Lewis said "the broad shareholder response was not positive".
He added that institutional investors, which the companies were hoping to entice onto the share register, also reacted negatively to the concept.
"Generally there was not the support we anticipated."
Mr Lewis said investors didn't agree with the expected synergies from the merger, and added that "the investors in each company invested for different reasons."
Gindalbie is about to start site works on its Karara iron ore project in the Mid West, whereas Sundance is at a very early stage of development of its African mine.
Rejection of the merger represents a setback for mining veteran George Jones, who chairs both companies, and their advisers: Gindalbie was advised by Azure Capital and Sundance was advised by Capital Investment Partners.
In a joint statement, the companies said their decision to axe the merger also followed due diligence, which remains confidential.
Mr Lewis rejected speculation that the lack of a defined resource at Sundance's Mbalam iron ore project in Cameroon in Africa was a sticking point. It had been speculated that this made valuations of the company near impossible.
"I can refute that entirely. There has been no advice from the independent expert."
Mr Lewis said Sundance would not have to pay a $15 million break-fee, which was referred to in the original merger announcement.
Mr Jones said in a statement he was disappointed by the decision but expressed support for the boards and management of the two companies.
Gindalbie is planning to press ahead with its Karara iron ore project in the Mid West while Sundance will continue to focus on Mbalam.
"We will continue to fast track our resource definition exploration program and associated feasibility studies, with the expectation of defining a project capable of underpinning our global iron ore business strategy," Mr Lewis said.
A joint statement is pasted below:
GINDALBIE AND SUNDANCE AGREE NOT TO PROCEED WITH MERGER
Gindalbie Metals Ltd (ASX: GBG - "Gindalbie") and Sundance Resources Limited (ASX: SDL - "Sundance") today advised that the Boards of both companies have decided not to proceed with the proposed merger announced on 24 September 2007.
The decisions follow due diligence undertaken by the companies and consideration of extensive feedback received from shareholders in both companies. The due diligence process remains subject to confidentiality provisions.
Commenting on the announcement, Mr George Jones, who is the Chairman and a shareholder of both Gindalbie and Sundance, said: "Although I am disappointed with the decision of the respective boards not to proceed with the merger, I would like to express my full support for both Boards and management teams and my strong belief in the quality of the iron ore projects being developed by both companies".
"Both Gindalbie and Sundance clearly have exciting projects which the respective companies can look forward to developing and which will, I believe continue to underpin strong growth in shareholder value," Mr Jones added.
Gindalbie's Managing Director, Mr Garret Dixon, said: "While the companies have agreed not to pursue the proposed merger, the Gindalbie Board remains fully committed to growing the Company through development of the Karara Iron Ore Project and other opportunities. We have a substantial resource at Karara and the development of our hematite and cornerstone magnetite projects remains the Company's first priority."
Sundance's Managing Director, Mr Don Lewis, said: "Sundance is committed to its vision for the development of the Mbalam Project as a world-class iron ore project. We will continue to fast-track our resource definition exploration program and associated feasibility studies, with the expectation of defining a project capable of underpinning our global iron ore business strategy. Today's decision does not in any way change this vision."
