(Bloomberg) – Yamana Gold Inc. is at the center of a battle for control after two Canadian mining companies teamed up on an unsolicited $4.8 billion bid to break an earlier merger deal with the southern company -African Gold Fields Ltd.
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Pan American Silver Corp. and Agnico Eagle Mines Ltd. announced a cash and stock transaction Friday valued at $5.02 per share. The proposed transaction would see Pan American acquire Yamana, while Agnico Eagle would purchase Yamana’s Canadian assets.
Yamana said the proposal was “superior” to the Gold Fields deal reached last May. Under the terms of this offer, the South African company now has five working days to match the offer. Gold Field disputed Yamana’s assertion of the merits of the competing proposals and said it would continue to work to complete its merger proposal.
U.S.-listed shares of Yamana jumped 17% to $4.76 per share at 1:21 p.m. in New York. Shares of Vancouver-based Pan American fell 10% in Toronto, while Agnico Eagle rose 1%.
The battle to acquire the Toronto-based precious metals producer is the biggest gold deal of the year. The competition for Yamana underscores the need for miners to increase production through acquisitions as the costs of extracting ore from the ground rise amid challenges in securing new gold deposits.
The latest proposal is for Pan American to offer shares to Yamana investors while Agnico Eagle is offering shares and contributing $1 billion in cash. The deal would make Pan American a major precious metals producer in Latin America, while Agnico Eagle would gain operational control of the Malartic mine in Canada after securing Yamana’s stake.
Separately, Toronto-based Agnico Eagle said it would buy $150 million worth of Pan American stock because of the “enhanced” opportunity that would come from their deal.
Gold Fields has faced criticism from investors over their combination, mainly due to the 34% upfront premium offered in a deal valued at $7.25 billion when it was announced on May 31.
“The emergence of another offering indicates that other mining companies are seeing the inherent value in Yamana’s assets,” the Johannesburg-based gold producer said in a statement on Friday. “Gold Fields will continue to work towards the completion of the transaction.”
Yamana shareholders are due to vote on the transaction Nov. 21, with Gold Fields investors voting Nov. 22.
The deal is critical to Gold Fields’ expansion into the Americas, as producers in South Africa have struggled with the geological challenges of operating some of the world’s deepest mines.
The competing bid sent Gold Fields shares jumping 11% on Johannesburg exchanges, bringing the company’s all-stock offer to around $5.49 a share and valuing the deal at $5.53 billion. dollars.
The stock’s reaction to the competing bid may suggest that Gold Fields will not participate in a tender for Yamana, according to Mandi Dungwa, analyst at Camissa Asset Management Ltd., Cape Town. If Gold Fields does not follow through, its investors will not face stock dilution, she said.
“Shareholders appear to believe they will not honor the terms of the competing offer,” Dungwa said. “Gold Fields would need to put in $1 billion on top of what was a premium offer, so I’m not sure they can convince shareholders the bidding war is worth it.”
The South African miner could end up restructuring its deal to put a higher value on Yamana and offer cash consideration, or walk away from the deal altogether, according to Credit Suisse analyst Jessica Xu.
“The two deals on the table aren’t too far apart, especially considering the $300 million breach fee that Yamana is expected to pay Gold Fields,” Xu said in a note to clients.
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