By Helen Reid
JOHANNESBURG (Reuters) - West Africa-focused Endeavour Mining (TO:EDV) has agreed to buy Teranga Gold (TO:TGZ) in an all-share deal that will create a top 10 gold producer aiming to list in London, the companies said on Monday, a week after announcing they were in talks.
Endeavour shareholders will end up with 66% of the combined entity, with Teranga shareholders holding the remaining 34%. Teranga will get three seats on the board to Endeavour's seven.
Endeavour will pay 0.470 of its own shares for each Teranga share, a 5.1% premium based on Friday's closing prices.
With investors jittery about pricey takeover deals amid a surge in gold prices, Endeavour's shares fell after the two announced they were in talks.
"Teranga had a very strong run over the past 12 months, so we're not trying to buy cheap - we're just trying to make the right deal that satisfies both sets of shareholders and that ensures the maximum support and maximum return going forward," said Endeavour CEO Sébastien de Montessus.
De Montessus said Barrick Gold (TO:ABX), which holds 11.44% of Teranga shares, supported the deal. Barrick CEO Mark Bristow has been calling for consolidation in the gold sector.
Endeavour will seek to list in London in 2021 as the largest premium pure gold producer in that market, eventually targeting entry into the FTSE 100 index.
Endeavour's acquisition of Teranga adds another operating mine - Wahgnion - to its four existing mines in Burkina Faso, and also gives it exposure to Senegal with the Massawa project, which Teranga bought from Barrick Gold last year.
"It works well in the sense that we continue to improve the quality of our own portfolio in terms of size, production cost and life of mine, but it also allows us to continue to diversify in West Africa," said de Montessus.
Endeavour's second acquisition this year after it bought Semafo in March, the deal will create a group with average annual production of more than 1.5 million ounces per year, with a production cost of around $850 per ounce.
La Mancha, Egyptian billionaire Naguib Sawiris' gold mining holding company and Endeavour's top shareholder, has committed to a $200 million cash injection into the new entity.
Endeavour and Teranga also negotiated debt refinancing as part of the deal.
(Graphic: Endeavour Mining to acquire Teranga Gold - https://fingfx.thomsonreuters.com/gfx/mkt/oakpexonnvr/ENDEAVOUR%20TERANGA%20NOVEMBER%2016%202020.PNG)