The board of Egyptian gold miner Centamin PLC (LON:CEY) have unanimously rejected a takeover approach published yesterday by Canadian group Endeavour Mining Corporation (TSE:EDV) (OTCMKTS:EDVMF).

In a response published on Wednesday, the FTSE 250 firm said it believed the £1.44bn (C$2.5bn) all-share merger is “skewed in favour of Endeavour’s shareholders and fundamentally undervalues Centamin”, adding that despite owning 47% of the combined company the group would contribute 57% of measured and indicated resources and 69% of inferred resources.

READ: Endeavour Mining proposes all-share merger with UK-listed Centamin

“The board strongly believes that Endeavour’s proposal significantly increases financial and operating risk without any material benefits to our shareholders”, said Centamin chairman Josef El-Raghy.

“It is the board’s belief that the proposal made by Endeavour sits in stark contrast with Centamin’s strategy and we strongly advise our shareholders to take no action”, he added.

Under the terms of the deal, investors will receive 0.0846 shares in Endeavour for each one they hold in Centamin, a deal which the Canadian group says represents a 13.1% premium to the closing price of both companies on Monday at an exchange rate of C$1.72 to the pound.

Investors may be holding out for a higher offer, says analyst

However, some analysts think the firm will need to sweeten the deal to get enough Centamin shareholders to back its proposal.

AJ Bell investment director Russ Mould cited a recent flurry of bidding activity in the gold sector, notably a US$3.7bn all stock bid by Canadian producer Kirkland Lake Gold Ltd (TSE:KL) for Detour Gold Corp (TSE:DGC) as well as a US$1.3bn cash offer for Continental Gold (TSE:CNL) by Chinese firm Zijin Mining.

Mould said that while investors’ faith in the deals would be higher if they were made in cash rather than stock, the spate of activity suggested “that those in the know feel that assets are going cheap”.

“Taking just this alone into account may persuade investors in Centamin to follow management’s advice and take no action regarding the offer from Endeavour, let alone the list of objections offered by the board to the deal, even if Centamin’s recent operational and financial record at its Sukari mine in Egypt is frankly patchy”, he said, adding that shareholders Centamin’s share price currently trades above the value implied by Endeavour’s offer.

“This suggests shareholders expect – or are at least holding out for – a higher bid”, he said.

In mid-afternoon trading on Wednesday, Centamin shares were flat at 128.8p.