Momentum has built further behind Westgold Resources’ (ASX: WGX) bid to merge with fellow gold hunter Karora Resources (TSX: KRR) after the move was endorsed by a second proxy advisor – United States-based Glass Lewis & Co.
It comes hot on the heels of US-owned proxy advisory group Institutional Shareholder Services (ISS) last week recommending TSX-listed Karora’s shareholders vote in favour of the proposal at a special meeting to be held this Friday. The headline-making merger has been positioned to substantially reshape the gold mining landscape in Western Australia via what Westgold has described as a “formidable” company.
Like ISS before it put forward its positive recommendation, Glass Lewis says its imprimatur came after it ran a detailed evaluation of the merger’s potential benefits for Karora shareholders. The transaction, which would proceed via a court-approved plan under the Canada Business Corporation Act, requires a super-majority approval of two thirds of votes cast by Karora shareholders.
The boards of both Westgold and Karora have unanimously endorsed the merger, publicly emphasising the deal as pivotal in unlocking value for both companies. Karora management says its workforce will be instrumental in helping to navigating the new entity through the post-merger landscape.
Adding to the positive developments, Westgold has also secured conditional approval from the Toronto Stock Exchange (TSX) to list its ordinary shares in connection with the merger. The approval is contingent on the company meeting customary requirements, including finalising the transaction.
With independent proxy advisors championing this merger and TSX’s conditional listing approval, we are closer than ever to creating a formidable, internationally-investible gold company. This merger promises a strategic expansion across Western Australia’s prolific goldfields, enhancing our capability to deliver robust returns to shareholders.
Westgold Resources Managing Director and CEO Wayne Bramwell
With the indicative timetable for the deal, including Karora’s shareholder meeting on Friday and the final court hearing next week, both companies are aiming to unveil the expanded entity by the end of the month. Costs savings will be key to the success of the merger and as the completion date approaches, both companies are diligently preparing for integration.
When the deal was first announced in April, Westgold said it had identified substantial savings that could be delivered from trimming its corporate overhead to the tune of $281 million, in addition to $209 million in operating costs in the next decade.
Upon completion of the merger, the new company is set to achieve an annual gold production of 400,000 ounces. Becoming an unhedged significant mid-tier producer will also see it benefit from any fluctuations in gold prices.
Westgold has won over two important box-tickers through the respective endorsements of two of the biggest shareholder proxy services in the world. As the completion date looms at the end of the month, the merged entity looks set to become a significant gold production company with a market capitalisation of $2.2 billion – and that is likely to put it in the frame of attention for global investors.
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