A worker stands in an access tunnel of Gold Fields South Africa Company's South Deep gold mine in Westonaria, Gauteng, on October 12, 2022.LUCA SOLA/AFP/Getty Images
Yamana Gold Inc.’s YRI-T founder says there is zero chance the Canadian gold and silver miner will agree to a lower takeover offer from Gold Fields Ltd., after several large shareholders criticized the South African miner for offering too much.
“There is no scenario in which we would change the terms of the deal,” executive chairman Peter Marrone said in an interview.
“Our board has unanimously recommended this transaction, and this is the transaction that we’re backing.”
Johannesburg-based Gold Fields said in May that it intended to acquire Yamana for a 42-per-cent premium to its stock market value in a share swap worth US$6.7-billion. Gold Fields shares lost more than a fifth of their value the day the deal was announced and are down about a third in total since then, amid a broader sell-off in the gold mining sector.
RWC Partners Ltd., known as Redwheel, denounced the deal after it was announced, saying Gold Fields had made a serious error and labelling it a risky and expensive transaction. The London-based institutional investment firm owns 19.9 million Gold Fields shares, making it the second-biggest holder of the U.S.-listed stock.
Yamana’s shares have consistently traded at a discount to the share-exchange ratio being offered by Gold Fields, suggesting investors are not certain the takeover will succeed.
Earlier in the week, Joe Foster, a portfolio manager with Van Eck, Yamana’s biggest shareholder, told The Globe and Mail that Yamana would be far better off remaining a standalone company, given its current outperformance. He argued that the deal is “poorly structured” and said that premium deals invite arbitrage investors, speculators and short sellers, all of whom trade in and out of the stock while a deal is pending. That causes volatility while the deal is live and a stock overhang after the deal closes.
But Mr. Marrone fought back Friday against such concerns in an impassioned address.
“We believe the deal is very well structured,” he countered in a conference call.
Yamana executives, board members stand to reap over US$100-million if Gold Fields deal closes
He argued that in a scenario where the acquirer trades at a premium and the target trades at a discount, as was the case with Gold Fields and Yamana, respectively, before the deal was announced, then a premium is “warranted and important,” or the deal is “otherwise unfair.”
He defended premium deals, saying they can work in some instances. He cited his company’s 2014 acquisition of its 50-per-cent share in the Canadian Malartic mine, a transaction that was criticized at the time as expensive but has since proven to be a winner.
He also took issue with a recent study from Scotia Capital Inc. that showed premium takeover deals in the mining sector don’t perform nearly as well as no premium transactions. While Mr. Marrone criticized the researchers’ small sample size, he did not offer any comparable research of his own.
Mr. Marrone and other board members and executives at Yamana stand to walk away with more than $100-million in severance and other compensation benefits if the deal with Gold Fields is approved by shareholders. Yamana shareholders will meet on Nov. 21, and the threshold for approval is two-thirds of votes cast. Gold Fields shareholders meet the following day, and the bar is 75 per cent of votes cast.
One of the major unknown factors determining the fate of the deal is the upcoming assessment from proxy advisory firms Institutional Shareholder Services (ISS) and Glass, Lewis & Co. Many large institutional firms rely on recommendations from such proxy firms, which will advise voting for or against a deal, before making a decision.