St Barbara defends its bid for Allied Gold

A SHARE price-bruised St Barbara has hit back at critics of its agreed cash-scrip takeover bid for gold producer Allied Gold.

A SHARE price-bruised St Barbara has hit back at critics of its agreed cash-scrip takeover bid for southwest Pacific gold producer Allied Gold, worth $556 million when it was launched last month.

Managing director Tim Lehany has taken critics to task over the suggestion that the bid was made at the behest of the big cross-shareholders in the two companies, that the bid was being made for growth's sake alone and that the implied 90 per cent premium on day one of the offer was over the top.

His withering attack was contained in an "open briefing" interview lodged with the stock exchange.

It comes ahead of today's release of St Barbara's June quarter production report and follows the 36 per cent slump in its share price since June 29, the day the Allied bid was announced.

"I want to make it quite clear that at no time has any large St Barbara shareholder come to us suggesting this transaction," Mr Lehany said. "Quite the opposite. The thinking behind the St Barbara-Allied combination originated within St Barbara and stemmed from our fundamental geological assessment of the assets and their potential."

The offer for Allied is $1.025 in cash and 0.8 of a St Barbara share.

It initially valued Allied at $2.72 a share or a 90 per cent premium to Allied's pre-bid share price of $1.44 a share. The implied value has since fallen to $2.09 an Allied share because of the slump in St Barbara's share price in the intervening period.

Mr Lehany rejected suggestions that St Barbara was chasing growth at the expense of shareholder value by agreeing to the 90 per cent premium.

"This transaction is definitely not about scale for scale's sake. It is about creating long-term value through building a stronger and more profitable company," Mr Lehany said.

He said it was clear the investment community, particularly in Australia, was not familiar with the asserts of the London and Australian Securities Exchange-listed Allied.

He said none of the 12 analysts that covered St Barbara covered Allied. As a result, St Barbara had re-intensified investor education on what it sees as the "fundamental" value in combining with Allied.

"The fact remains that the Allied acquisition is fundamentally a transformational opportunity for St Barbara," he said.

"We believe our shareholders stand to benefit from ownership of a more diversified business, with a broader portfolio of long-life assets, significantly increased production, reserves and resources, and enhanced exploration potential."

Mr Lehany defended the premium in the Allied offer on the basis that, like the share prices of a number of listed gold equities, Allied's share price has been under pressure in recent months.