Vancouver's Silvercorp Metals Inc. (TSX:SVM) plans to make a takeover bid for Vancouver-headquartered Klondex Mines Ltd. (TSX:KDX) in a deal worth approximately $70 million.
Rui Feng, Silvercorp's chairman and CEO, said the company was unsuccessful in completing a negotiated transaction with Klondex and decided to take its proposal directly to Klondex shareholders. "We believe our offer reflects the fair value of Klondex and offers an attractive premium to Klondex shareholders."
Silvercorp is offering 0.50 common shares of Silvercorp for each Klondex share, valuing Klondex at about $2.18 per share. The transaction represents a 63% premium to Klondex's 20-day volume-weighted average price as of June 5.
The deal aims to expand Silvercorp's project mix, which has focused on silver, lead, zinc and gold mining in China. Klondex owns a number of projects in northern Nevada. Its principal asset is the Fire Creek property, which Silvercorp sees as an attractive complement to the company's pipeline of growth projects.
"We intend to rapidly progress the development of Fire Creek to maximize the benefit for all post-transaction Silvercorp shareholders," said Feng.
Silvercorp plans to launch its offer the week of June 15, after which it will remain open for at least 35 days following the start of the offer.
The deal is subject to a minimum tender threshold of 66.67% of Klondex shares and other customary closing conditions and regulatory approvals.
Since May 28, Silvercorp's trading volume has more than doubled. It peaked June 3 with 4.5 million shares traded in one day. Its daily trading volume has generally been around 500,000 shares. The company released a statement last week at the request of the Investment Industry Regulatory Organization of Canada (IIROC) saying that it did not have a reason for the increased trading activity.
Silvercorp's share price during the past week: between $3.55 and $4.36; 52-week high: $7.85; 52-week low: $1.19.
Klondex's share price range during the past week: between $1.09 and $1.37; 52-week high: $1.73; 52-week low: $0.30.