Gold Fields Ltd. GFI-N is steaming ahead on its mission to buy Yamana Gold Inc., YRI-T despite two other big precious-metals companies emerging with a substantially higher offer for the Canadian gold and silver miner.
Agnico Eagle Mines Ltd. AEM-T and Pan American Silver Corp. PAAS-T on Friday topped the Gold Fields equity-only offer, with a cash and stock proposal worth US$4.8-billion. The proposal is a 23-per-cent premium to Yamana’s market value, before the deal was announced, and 15-per-cent higher than Gold Fields’s earlier offer for Yamana was worth.
Despite being outgunned, South Africa’s Gold Fields said in a release on Friday that its original offer is strategically superior with “lower operational and execution risk,” given the company’s robust free cash flow, strong balance sheet and technical prowess. Gold Fields said it will continue to work toward closing the transaction, despite the negative reaction it got in the market.
Its May offer for Yamana was poorly received, with Gold Fields shares down around 40 per cent in the interim, and Yamana’s shares trading at a roughly 7-per-cent discount to the offer. Two of Gold Fields’s biggest shareholders had denounced its 42-per-cent premium offer as making no sense strategically.
RWC Partners Ltd. (Redwheel) said in June that Gold Fields should abandon its pursuit of Yamana because the acquisition was far too expensive. Earlier this week, in another plea to Gold Fields, Redwheel said the miner should do a major share buyback, instead of buying Yamana.
John Malloy, co-head of the emerging and frontier markets team at Redwheel, said in an interview on Friday that he was happy to see another bid surface for Yamana. Gold Fields now had an out that allowed the miner to “gracefully exit” the transaction, he added. When asked what his reaction would be if Gold Fields eventually elects to top the bid from Agnico and Pan American, he replied: “They’d have a big problem with all their shareholders.”
Under the new proposal unveiled on Friday, Yamana shareholders are set to receive US$1.0406 a share in cash, 0.0376 of an Agnico share, and 0.1598 of a Pan American share for each security held. Gold Fields had offered 0.6 of its shares for each Yamana share.
If the new deal succeeds, Agnico would buy the 50 per cent it doesn’t already own in the Malartic mine in Quebec from Yamana, as well as its other operations in Canada. Pan American would buy the rest of Yamana’s assets, which includes four gold and silver mines in South America.
Last week, The Globe and Mail reported that before entering exclusive talks with Gold Fields, Yamana had engaged in M&A discussions with Agnico. Agnico had originally entertained buying the whole of Yamana, but ultimately decided it only wanted to buy certain assets, including its share in Malartic. Agnico and Yamana have been joint-venture partners in the massive Quebec mine since 2014.
Yamana shareholders vote on the Gold Fields deal on Nov 21, with at least two thirds of votes cast needed for success. Gold Fields shareholders vote the day after, with the company needing to obtain 75 per cent of votes cast for the deal to pass.
If Gold Fields falls short in its quest to buy Yamana, it will be paid a deal break fee of US$300-million by Yamana.
Shares in Yamana soared Friday on the New York Stock Exchange by 20 per cent to close at US$4.89 apiece. Agnico’s NYSE-listed shares closed up 5.7 per cent to US$43.45 apiece, while Pan American shares fell by 4.3 per cent on the Nasdaq to US$14.63 each.