Jaguar calls off search for suitor

After a long ordeal Jaguar Mining (JAG-T, JAG-N) hasn’t been able to close a deal for the company and is dissolving its special committee of directors charged with examining possible takeovers.

The strategic review of the company’s options got underway last November amidst rumors that Hong Kong-based Shandong Gold group was looking to takeover the miner with several small to mid-sized gold mines in Brazil. The proposal from Shandong was said to be for $9.30 per Jaguar share.

Word of the potential acquisition sent the company’s shares price running, as it closed as high as $7.98 in mid-November. Since late February, however, the company’s stock has been on a steady slide and in Toronto on May 9 its shares were trading for just $1.66.

The seeds of that decline were sown when Jaguar’s board rejected the initial Shandong offer. The bone of contention, from Jaguar’s point of view, was that Shandong wanted to prevent Jaguar from exploring other alternatives while it did its due diligence and sought government approvals for the transaction.

Around that same time Jaguar said two other parties had expressed serious interest in acquiring it.

Ultimately that number fell to one, an unnamed North American based mining company. In early February it looked like the white knight North American miner was set to make a move as it tabled a preliminary proposal for between U.S. $8.20 and U.S. $9.45 per share.

The due diligence process went from February into April, but the movement of the Jaguar’s share price indicated the market wasn’t optimistic about a deal. Such skepticism proved well founded as while Jaguar says it was set to sign off on a deal, in mid-April the potential acquirer backed out.

That left Jaguar with Shandong and the company says it made “persistent and repeated efforts” to engage the company. Such attempts included sending over a copy of the definitive agreement it was set to enter into with the unnamed North American mining company. Shandong, however, wouldn’t bite and didn’t respond to the overture.

Then in early April reports surfaced that Shandong may still be interested and Jaguar’s shares responded with a 15% gain in one day, closing at $4.65 on April 10th. But the market enthusiasm was short lived. The stock began to slide, and its movement again correctly predicted the outcome. On May 8 Shandong told Jaguar it was calling off acquisition discussions.

Jaguar blames a combination of weak equity markets in general and operational issues at its mines for the inability to close a deal.

The company says it is continuing to resolve operational issues at its mines by targeting improved costs and better efficiency.