Gold Fields sweetens bid for Yamana with improved payout policy, proposed TSX listing

Chris Griffith, CEO, Gold Fields

GOLD Fields has sweetened its all-share bid for Yamana Gold saying today it will increase dividends and that it had applied for a listing of its shares on the Toronto Stock Exchange.

The group’s CEO Chris Griffith also said he had been “greatly encouraged by the constructive discussions we have had with our shareholders” following unveiling of the deal on May 31.

Shares in the company fell about a quarter following announcement of the transaction which analysts criticised for being too expensive. There was also concern that Yamana shareholders would not prefer to be given Johannesburg-listed stock.

The proposed listing in Toronto – yet to be approved by the stock exchange – is intended to address this latter concern whilst the revision in its dividend policy makes Gold Fields a higher yield value proposition.

Gold Fields will retain its primary listing on the Johannesburg Stock Exchange.

In terms of the dividend adjustment,  Gold Fields will pay out 30% to 45% of normalised earnings at the interim and final dividend stage which compares to its current payout policy of 25% to 35% of normalised earnings.

In addition, the interim and final dividend payout for the 2023 financial year – roughly 12 months after the proposed completion of the takeover of Yamana Gold – will be 45% of normalised earnings.

Said Griffith: “The board and management team remain steadfast in their belief in the long-term benefits that this deal will bring to both sets of shareholders”.

Gold Fields offered 0.6 of its shares for each Yamana which at the time of the transaction announcement represented a 33.8% premium. That premium has narrowed following investor response to the deal.

However, some analysts believe the deal should go ahead as Gold Fields had already derated and was unlikely to regain its previous rating in the short term.

“Given the perceived unhappiness with the deal, there has been questions as to whether investors may vote the deal down,” said Arnold van Graan, an analyst for Nedbank Securities in a note last month. “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,” he said.

Gold Fields requires support of 75% of shareholders to approve the Yamana deal whilst Yamana requires two-thirds of shareholders to support it.

Gold Fields is building the $860m Salares Norte project in Chile, but it doesn’t have other major growth projects in its pipeline which raises the concern that production will fall from between 2.7 to 2.8 million ounces in 2025 to just over two million ounces five years later.

Griffith has argued that the Yamana transaction will grow Gold Fields’ production to 3.2 million ounces and with the completion of the Salares Norte project will make Gold Fields the world’s third largest gold producer.

But another criticism Gold Fields has faced has been the timing of the transaction. Redwheel, a UK fund which owns about 3% of Gold Fields, said in June that Gold Fields didn’t need to transact now on growth. “We believe the company has ample time to be opportunistic over the next few years rather than rushing into a significantly dilutive acquisition today,” it said.

In an apparent retort to this criticism, Griffith said today: “The acquisition of Yamana represents the culmination of many months of assessing the best option to accelerate Gold Fields’ growth strategy and deliver long term shareholder value.

“Having explored both organic growth and bolt-on acquisitions, moving now to complete this transaction is the best opportunity for both speed of delivery and value to accelerate the next phase of the company’s growth,” he said.

Griffith, the former CEO of Anglo American Platinum, was appointed CEO of Gold Fields in April 2021.

Shares in Gold Fields traded down about 2% in early Johannesburg trade today.