Underworld Resources Inc. and Kinross Gold Corp. March 11 said their respective boards of directors have approved a business combination by way of a friendly offer in which Kinross will acquire 100 percent of the outstanding common shares of Underworld that it does not already own for stock and cash valued at about C$139.2 million.
Subject to execution of definitive agreements, the Underworld board unanimously recommended the offer to its shareholders and Underworld’s directors and management team have agreed to tender their shares to the offer.
Underworld's key asset is the White Gold project, located in the Tintina gold belt, approximately 95 km south of Dawson City, Yukon Territory, Canada.
Under terms of a letter agreement, Underworld will work exclusively with Kinross toward conclusion of a definitive support agreement, which is anticipated to be executed and delivered by the parties by March 15.
Kinross offered 0.141 of a Kinross common share, plus C1 cent in cash for each common share of Underworld. The offer represents an implied offer price of about C$2.62 per common share, based on the March 10, closing price of C$18.54 per Kinross common share on the Toronto Stock Exchange.
The companies said Kinross’ offer represents an attractive and immediate premium of 36 percent over the March 10 closing price and a premium of about 50.2 percent based on the volume-weighted average prices of Underworld’s common shares and Kinross' common shares, for the 20 trading days that ended March 10.
Underworld’s directors, after receiving the recommendation of a special committee of independent directors that is overseeing the transaction process, has unanimously determined that the offer is in the best interests of Underworld and Underworld’s shareholders, and unanimously recommended that Underworld shareholders tender their common shares to the offer. The directors and senior officers of Underworld will enter into customary lock-up agreements with Kinross to tender all of their common shares to the offer.
“The Kinross Offer brings substantial technical and financial resources to the White Gold property, which will further rapidly advance the project,” said Underworld Chairman Michael Williams. “We feel the Kinross offer provides immediate value to our shareholders.”
Underworld’s financial advisor Canaccord Financial Ltd. has provided an oral opinion to the Underworld board of directors that the consideration offered is fair, from a financial point of view, to Underworld’s shareholders.
Full details of the offer will be included in the formal offer and take-over bid circular to be mailed to Underworld shareholders shortly. The offer will be open for acceptance for at least 35 days following the commencement of the offer. The offer is subject to several conditions, including acceptance of the offer by the holders of at least two-thirds of the outstanding common shares (calculated on a fully diluted basis) and the receipt of all necessary regulatory approvals. If Kinross acquires at least two-thirds of the outstanding Common Shares, Kinross intends to take steps to acquire all outstanding common shares not acquired pursuant to the offer. If 100 percent of the common shares are tendered, Kinross will issue about 6.8 million common shares pursuant to the transaction (based on the fully-diluted share capital of Underworld), representing about 1.0 percent of Kinross' current outstanding common shares.
