Home Commodities Pan American and Agnico are enduring a competing $4.8 billion bid for Yamana Gold

Pan American and Agnico are enduring a competing $4.8 billion bid for Yamana Gold

by SuperiorInvest

Precious metals miners Pan American and Agnico Eagle have made a joint $4.8 billion bid for Yamana Gold, after Gold Fields faced an uphill battle to convince investors to back its takeover bid.

The two companies have offered a stock and cash deal that represents a 15 percent premium to the company full stock offer from May by South Africa’s Gold Fields and would see Yamana’s assets split between the two groups.

The takeover battle comes as precious metals producers grapple with rising costs of inputs such as fuel, cyanide and explosives and a slump in gold prices due to rising interest rates and a strong US dollar.

The sector is generally considered ripe for consolidation as it is much more fragmented than other areas of the metals industry.

Under the terms of the deal, each Yamana share would be exchanged for $1.04 in cash, 0.1598 of a Pan American share and 0.0376 of an Agnico Eagle share for a total value of $5.02 per share. Yamana shareholders would receive $1 billion in cash, and the offer represents a 23 percent premium to the share price at Thursday’s close.

A competing takeover bid is a setback for Gold Fields’ management, which has fought to win over shareholders who believed they were paying too high a premium. Its shares fell after the offer was made.

Shares in Johannesburg-listed Gold Fields jumped 15 percent on Friday, while shares in Yamana jumped 10 percent. Shares of silver producer Pan American fell 7 percent.

Yamana’s board of directors considers the latest offer to be a “superior offer” and intends to accept it unless Gold Fields exercises its right to match the offer within five business days.

Under the terms of the contracts, if the merger with Gold Fields is terminated in favor of a new offer, the Johannesburg-based group will receive a $300 million termination fee.

Gold Fields said in a statement that its offer remained “strategically and financially superior” with higher quality assets, lower risk and higher ongoing offer returns for Yamana shareholders. She added that she would provide another market update on Monday.

The deal would transform Pan American into a major Latin American precious metals producer. It would add four Yamana projects, expanding its portfolio to 12 mines, halving silver production and doubling gold output to 30 million and 1.2 million ounces, respectively.

Michael Steinmann, CEO of Pan American, said that “combining our existing portfolio with Yamana’s high-quality assets in Latin America would create a strong precious metals mining company in the Americas.”

Headquartered in Toronto Agnico Eagle will take over from Yamano a 50 percent stake in the Canadian mine Malartic, which it does not yet own.

A lack of greenfield exploration and development means most gold mining companies’ production levels will decline in the coming years, further fueling merger appetite.

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