Takeover bids lose their golden lustre as retail investors hold out

Gold is on the rise. Picture: Bloomberg

Gold’s return to $2200 an ounce appears to have shifted the fear-v-greed equation for shareholders in a pair of juniors targeted by Northern Star Resources and Silver Lake Resources.

Both bids are backed by the boards of the respective targets, but Silver Lake’s all-share offer for Egan Street Resources, and its Rothsay gold project in WA, looks to be in the most trouble.

When the takeover was launched Silver Lake shares were worth $1.445, valuing Egan Street stock at 40c a share, based on the 0.27-for-one offer. That was a healthy premium to the junior’s then 31c closing price. But since then — and for no readily apparent reason — Silver Lake stock has slid more than 30 per cent, in a market in which the All Ordinaries gold index has dropped only about 2 per cent.

At Monday’s closing price of $1, that makes Egan Street stock worth only 27c — well below where the company was trading when the takeover was launched.

It is understood at least two shareholder blocks are resisting the offer — retail shareholders organising (as always) on stockmarket forums and a block associated with Patersons Securities wealth management boss Mark Golouloulos — collectively worth up to 40 per cent of Egan Street shares.

Silver Lake has already extended the offer once, on September 10, shortly after S&P announced its promotion into the ASX 200 index.

But if the company was hoping its stock would be pushed closer to the takeover’s starting price by index fund buying on Monday, when the latest rebalance took effect, then it will have been disappointed, with Silver Lake shares down 2c for the day.

And Northern Star’s cash offer for Echo Resources doesn’t appear to be travelling much better. The Bill Beament-led gold major started its 33c chase for Echo holding 21.58 per cent of its neighbour, and declared the bid unconditional yesterday holding 21.99 per cent.

DataRoom flagged issues with the Northern Star tilt on September 4, after Hong Kong-based arbitrage fund Maso Capital Investment emerged as a substantial investor, dropping $14m buying up 6.2 per cent at an average 32.25c a share.

Echo shares drifted above the bid price for the first time last week and Maso has kept buying, with its last few parcels bought at 33c on September 18, taking it to 7.8 per cent.

Another 2.5 per cent is held by Datt Capital, which values the stock at 40c and says it won’t be selling at 33c.

Northern Star also announced it would buy at 33c on the market, adding a bit more pressure to the holdouts, who are betting that the suitor is so keen to get hold of the 2 million-tonne processing plant at Echo’s Bronzewing project to process low-grade ore from its Jundee mine it will bump the offer to get it done fast.

Northern Star might yet be patient enough to win a majority holding on Echo’s register.