Pan American Silver (TSX: PAAS) and Agnico Eagle (TSX: AEM) announced on Friday that they have delivered a definitive binding offer to acquire Yamana Gold (TSX: YRI) and its certain subsidiaries and partnerships. The total consideration for the acquisition is reportedly US$4.8 billion.
The transaction would consist of Pan American Silver delivering 153.5 million shares and Agnico Eagle delivering 36.1 million shares plus US$1.0 billion in cash. At this rate, each Yamana Gold shareholder will receive US$1.04 in cash, 0.1598 Pan American Silver shares, and 0.0376 Agnico Eagle shares–valued at US$5.02 per Yamana Gold share held.
The consideration is estimated to be a 23% premium to Yamana Gold’s spot price as of market close on November 3. But given that Yamana Gold’s shares jumped as much as 17% when the markets opened on Friday following the news, the current trading price skirts closer to the offer. The gold firm’s market capitalization is approximately $6.20 billion (US$4.59 billion) as of this writing.
Post-closing, Pan American Silver would acquire all of the issued and outstanding common shares of Yamana Gold while Agnico Eagle would get certain subsidiaries and partnerships which hold Yamana Gold’s interests in its Canadian assets to Agnico Eagle, including the Canadian Malartic mine.
Should the transaction proceed, existing Pan American Silver and Yamana Gold shareholders would own roughly 58% and 42% of Pan American Silver, respectively. Similarly, existing Agnico Eagle and Yamana Gold stockholders would own about 93% and 7% of Agnico Eagle, respectively, at the closure.
The acquisition is set to make Pan American Silver “a major precious metals producer in Latin America” with approximately 28.5 to 30.0 million ounces of annual silver production and approximately 1.1 to 1.2 million ounces of annual gold production. It will also consolidate the ownership of the Canadian Malartic mine for Agnico Eagle, who currently shares 50-50 ownership with Yamana Gold.
Yamana Gold’s board has deemed the offer a “superior proposal” over the current acquisition bid from Gold Fields entered back in May. The firm has informed the latter of the intention to accept the binding offer, triggering the period allotted for “right to match” that expires on November 15.
Should the arrangement with Gold Fields be terminated, Yamana Gold would have to pay a termination fee of US$300 million. In parallel, the arrangement with Pan American Silver–once activated after Gold Fields arrangement expires–will include a reciprocal termination fee of US$250 million, payable by Yamana Gold to Pan American Silver, or US$375 million payable from Pan American Silver to Yamana Gold, depending on who will terminate the agreement.
The planned acquisition sees no major hurdles aside from Gold Fields’ competing offer as it doesn’t need approval of Agnico Eagle shareholders and it only needs a simple majority approval by Pan American Silver shareholders. The transaction is also expected not to need a review under the Investment Canada Act.
However, it does need the approval of the Yamana Gold shareholders with 66.6% of the votes in favor.
Should no contest be held on the offer, the arrangement is expected to close late in the first quarter of 2023.
Yamana Gold last traded at $6.42 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.