GOLD Fields’ hopes of winning support for the takeover of Yamana Gold received a body blow on Friday after it emerged a large shareholder wanted it to abandon the deal.
“While we acknowledge Gold Fields’ desire to secure long-term production growth, we believe that the takeover of Yamana is both too expensive and not guaranteed to deliver production growth and profitability,” Redwheel said.
The all share deal, currently valued at about $5.3bn, caused consternation among some analysts which said Gold Fields was overpaying and that the growth pipeline it sought in Yamana was expensive to build and potentially risky.
Shares in the company fell about 23% in the wake of the deal announcement on May 31.
According to BMO Capital Markets analyst, Jackie Pryzybylowski, Gold Fields’ offer was even beginning to look a bit light given the weakness in its share price.
“We suggest the proposed price is now no longer a fair value to Yamana shareholders, although it’s not clear if the offer could be re-priced or a cash component could be added to support the valuation ahead of the transaction potentially closing late Q3/22 or within H2/22,” said Pryzybylowski.
Said Redwheel: “Based on Gold Fields own current project pipeline, we expect that it can drive current production to over 2.7 million (ounces) by 2025 before trending down to two million ounces.
“This production growth is already one of the strongest across the major gold miners globally. We believe the company has ample time to be opportunistic over the next few years rather than rushing into a significantly dilutive acquisition today.”
There are views, however, that Gold Fields ought to press ahead with the transaction.
“Investors are invariably negative on the transaction. Timing was not good with the world going into recession. What’s done is done and only the shareholder votes due in August 2022 can torpedo the merger,” said René Hochreiter, an analyst at Noah Research.
“Whether the share price will go back to pre-merger levels if the merger does not get the go ahead from shareholders is another story,” he said. “If the vote is negative, then confidence in managements is destroyed and share prices will probably stay at lower de-rated levels.”
Gold Fields requires 75% of shareholder support to have the deal approved while Yamana needs about 67%.
Said Arnold van Graan, an analyst for Nedbank Securities: “Given the perceived unhappiness with the deal, there has been questions as to whether investors may vote the deal down. We believe that would be futile. The share price damage has been done, and voting down the deal would not see Gold Fields re-rate to pre-deal levels.”