Osino Resources Deal Took Over 1 year to Materialize For those folks that aren’t aware, M&A activity in the mining industry is picking up. The acquisition of Osino Resources Corp is what I’d like to point people’s attention to.
-Dec 18, 2023, it was announced that Osino was being acquired by Dundee Precious metal in a stock/cash deal that valued Osino at $1.55 / share. For reference, On Dec 12, 2023 Osino was trading at $1.03 / share.
-Feb 19, 2024, shortly before the shareholder vote on the deal, Osino announced it had received a superior acquisition proposal to be acquired for $1.90 / share in an ALL-CASH transaction.
-Feb 25, 2024 Osino announced they were accepting the superior ALL-CASH offer and terminating the agreement with Dundee Precious Metals
Osino Management Information Circular
How long did this deal take to negotiate?
Below I’m pasting the background section from the management information circular about the (Dundee Precious Metals offer) deal available on Sedar. It gives a good sense of how long these types of transactions take to put together. A special committee was formed, and financial advisors engaged at the end of 2022. As time went on, Osino received lowball offers and declined them. They continued to drill and de-risk their project. After over a year of work, an acceptable deal finally materialized.
The section below start on the page labeled Page 50 of the Management Information Circular (which I believe is Page 69 of the PDF file).
Happy reading. Overall I was very happy to see an example of a deal that took a long time to materialize. Gives me great optimisim for LME as I continue to accumulate shares at the current depressed price.
Background to the Arrangement
The Arrangement Agreement is the result of arm’s length negotiations among the representatives of
Osino that are independent of DPM, representatives of DPM that are independent of Osino, and their
respective financial and legal advisors. The following is a summary of the principal events leading up
to the execution and public announcement of the Arrangement.
Over the past several years, Osino has been focused on the exploration and development of its mining projects in Namibia, including its high-quality, long-life Twin Hills project. The Board and management periodically reviewed Osino’s long-term strategic plans and prospects with the goal of maximizing shareholder value, taking the interests of Osino’s other stakeholders into account. As part of this process, management and the Board evaluated Osino’s assets, potential financing alternatives, M&A and other value enhancing initiatives. When considered appropriate, Osino engaged in discussions with various strategic and financial counterparties with the aim of maximizing shareholder value. In connection with such discussions, Osino would generally enter into confidentiality agreements with such parties consistent with market practice.
In order to assist with the evaluation of strategic alternatives, Osino retained BMO Capital Markets
and Treadstone Resource Partners (collectively, the “Financial Advisors”). Starting towards the end
of 2022 and throughout 2023, the Financial Advisors contacted entities that, based upon their
judgment and experience, with input from management, were considered to be logical potential
counterparties. At that time, the Board created the Special Committee, comprised of Marvin Singer,
Margot Naudie, and David Hodgson, to review and consider any proposals received by the Financial
Advisors. Some of the potential counterparties showed little or no interest, while others (including
DPM) engaged in due diligence and received information about Osino, the Twin Hills project, and
Osino’s exploration portfolio. DPM and certain other potential counterparties submitted non-binding
proposals to Osino with terms that were determined not to be reflective of the value of Osino and not
in the best interest of Osino.
In parallel with the Financial Advisors’ engagement with potential counterparties, Osino advanced its
development plans and was in advanced negotiations throughout 2023 with potential financing
providers in order to fund construction and development work at the Twin Hills project in the event that Osino remained an independent company.
Osino and DPM entered into the April 2022 Confidentiality Agreement, which was subsequently
supplemented by the December 2023 Confidentiality Agreement. DPM engaged in due diligence on
Osino and the Parties had multiple discussions about the value of Osino, which resulted in three non-
binding proposals being submitted by DPM to Osino in December, 2022 and February 2023. The
Special Committee and the Board determined that such non-binding proposals did not reflect the value of Osino. Although the discussions with DPM in late 2022 and early 2023 did not initially result in an alignment on value, the Special Committee and the Board instructed management to continue to dialogue with DPM to determine if the Parties held mutually beneficial interests which would be
constructive in the future.
DPM and Osino continued to dialogue on and off throughout 2023 and on November 3, 2023, DPM
provided Osino with a revised non-binding proposal (the “November 3 Proposal”) that contemplated a transaction in which DPM would acquire all of the outstanding Osino Shares that it did not already own, subject to the completion of satisfactory due diligence and certain other conditions including, without limitation, Securityholder approval and applicable regulatory approvals.
The Board and the Special Committee considered the November 3 Proposal. Following consideration by the Special Committee and the Board, after consultation with the Financial Advisors, the Special Committee and the Board determined that the offer price in the November 3 Proposal was below the price at which the Board was willing to transact. Osino provided a response to DPM, highlighting that Osino was willing to engage in constructive discussions with DPM regarding a potential transaction at a higher price and would provide access to relevant due diligence information in connection with such discussions.
DPM and Osino continued to dialogue, and on November 24, 2023, DPM provided Osino with an
improved non-binding proposal, which was further revised on November 27 (being the November 27
Proposal), that contemplated a transaction in which DPM would acquire all of the outstanding Osino
Shares that it did not already own, subject to the completion of satisfactory due diligence and certain
other conditions including, without limitation, Securityholder approval and applicable regulatory
approvals. The November 27 Proposal included the $1.55 per share price, which was a significant
improvement from DPM’s prior offers.
Following receipt of the November 27 Proposal, Osino’s management met with the Financial Advisors to review such offer. The Board and the Special Committee subsequently met on November 27, 2023, to consider the November 27 Proposal and to consider the status of the discussions with other parties and gauge their ability to meet or exceed the terms contained in the November 27 Proposal. The Board considered information provided by the Financial Advisors and Osino’s management and the advice of its legal counsel and the Special Committee.
On November 28, 2023, Osino executed the November 27 Proposal and agreed to an exclusivity
period until January 5, 2024, in order for the Parties to complete confirmatory due diligence and
negotiate definitive transaction documents. During this period, in addition to negotiating the
Arrangement Agreement and the Support Agreements, DPM completed its due diligence review of
Osino, while Osino also performed reciprocal due diligence on DPM in a limited manner customary for target companies that are contemplating transactions similar to the Arrangement.
On November 28, 2023, legal counsel to Osino and DPM had an introductory call to discuss the timing and process to negotiate the Arrangement Agreement and related party considerations.
The initial drafts of the Arrangement Agreement and the form of the Support Agreement were
circulated by Cassels on December 1, 2023 and were reviewed and discussed by the management of Osino, Stikeman and the Financial Advisors.
On December 4, 2023, the Special Committee met to consider obtaining a fairness opinion from Eight Capital on a fixed fee basis in light of the recommended practice for arrangement transactions under Division 5 of Part 9 of the BCBCA.
On December 6, 2023, a meeting of the Board was convened with members of management, the
Financial Advisors and Stikeman to receive an update and a summary from Stikeman of the key terms of the initial draft of the Arrangement Agreement. The meeting of the Board was then adjourned so that the Special Committee could meet.
The Special Committee then met (with members of management, the Board and Stikeman present)
to review the key terms of the initial draft of the Arrangement Agreement and discuss the fairness
opinion to be requested from BMO Capital Markets.
On December 7, 2023, the Special Committee entered into an engagement letter with Eight Capital
pursuant to which Eight Capital agreed to provide the Eight Capital Fairness Opinion on a fixed fee
basis. See “The Arrangement – Fairness Opinions – Eight Capital Fairness Opinion”.
Following several calls between Stikeman and Cassels to discuss, among other things, the
Arrangement Agreement, revised versions of the draft Arrangement Agreement and the form of the
Support Agreement were circulated by Stikeman on December 7, 2023, for review by Cassels and
DPM.
Between December 7, 2023 and December 15, 2023, the Parties exchanged a number of drafts of the Arrangement Agreement and the Support Agreement and on December 16, 2023, the Parties had
substantially final drafts of such documents, subject to the approval by Osino’s Board and Special
Committee as well as DPM’s board of directors.
On December 17, 2023, a meeting of the Special Committee (with members of management, the
Board, the Financial Advisors and Stikeman present) was convened to receive an update and a
summary from Stikeman of the key terms of the substantially final draft of the Arrangement Agreement. The Special Committee received presentations from Eight Capital on the Eight Capital Fairness Opinion. Eight Capital reviewed the methodologies and analysis underlying the Eight Capital Fairness Opinion and verbally advised the Special Committee that, subject to the assumptions, limitations and qualifications set forth in the Eight Capital Fairness Opinion, it was of the opinion that, as of the date of the Eight Capital Fairness Opinion, the consideration to be received by the Osino Shareholders (other than DPM) pursuant to the Arrangement is fair, from a financial point of view, to the Osino Shareholders. See “The Arrangement – Fairness Opinions – Eight Capital Fairness Opinion”.
After discussion, including of the matters discussed under the heading “The Arrangement – Reasons
for the Arrangement”, and consultation with its financial and legal advisors, and taking into account
the best interests of Osino, the Special Committee unanimously determined that the Arrangement is
fair to the Securityholders (other than DPM), and is in the best interests of Osino.
Accordingly, the Special Committee accepted the Eight Capital Fairness Opinion and then
unanimously recommended that the Board approve the Arrangement and enter into the Arrangement
Agreement, and further, that Osino Securityholders (other than DPM) vote in favour of the
Arrangement Resolution.
A meeting of the Board was then convened (with members of management, Stikeman and the
Financial Advisors present) to receive (a) presentations from BMO Capital Markets in connection with
the BMO Capital Markets Fairness Opinion. whereby BMO Capital Markets reviewed the
methodologies and analysis considered by BMO Capital Markets in connection with the BMO Capital
Markets Fairness Opinion, and then orally advised the Board that it was of the opinion that, as of the
date of the BMO Capital Markets Fairness Opinion and subject to the assumptions, limitations and
qualifications set forth in the BMO Capital Markets Fairness Opinion, the consideration to be received by the Shareholders (other than DPM and its affiliates) pursuant to the Arrangement is fair from a financial point of view to the Securityholders (other than DPM and its affiliates) (See “The Arrangement – Fairness Opinions – BMO Capital Markets Fairness Opinion”); and (b) to receive the Special Committee’s recommendation and discuss certain matters, including those outlined under the heading “The Arrangement – Reasons for the Arrangement”. After this discussion and consultation with its financial and legal advisors, and taking into account the recommendation of the Special Committee, the Board unanimously determined that the Arrangement is fair to the Securityholders (other than DPM), and is in the best interests of Osino, and accordingly, approved the Arrangement and entering into the Arrangement Agreement and determined to recommend that Osino Securityholders vote in favour of the Arrangement and the Arrangement Resolution.
Following these meetings and the recommendations and determinations of the Special Committee
and the Board, counsel to Osino and DPM arranged for execution of the Arrangement Agreement and the Support Agreements, as applicable.
Osino and DPM issued a joint press release announcing the Arrangement on December 18, 2023,
prior to the opening of trading on the TSX and TSXV.
In connection with the Arrangement Agreement, Osino completed the first of two tranches of a non-
brokered private placement transaction on December 22, 2023, pursuant to which it issued an
aggregate of 4,424,779 Osino Shares to DPM at a price of $1.13 per Osino Share for aggregate gross proceeds to Osino of $5,000,000.27. Pursuant to the Arrangement Agreement and the applicable subscription agreement, Osino, at its option, may complete the second tranche of such private placement on the same terms for aggregate gross proceeds to Osino of approximately $4,999,999.14.