Gold Fields says Yamana bid “strategically superior” following rival $4.8bn offer

Chris Griffith, CEO, Vedanta Base Metal.

GOLD Fields said a counter-bid for Yamana registered today by Pan American Silver Corporation and Agnico Eagle Mines underpins the value of its own offer which it said was superior to its rivals.

“As we have always said, the complementary nature of Yamana’s assets in the Gold Fields family will create significant near-term and long-term value for all shareholders,” said the South African firm’s CEO, Chris Griffith.

“As a result, it is clear that Gold Fields’ offer remains strategically and financially superior to the joint offer with lower operational and execution risk and higher sustained returns, given Gold Fields enjoys the free cash flow, balance sheet profile and technical capabilities to unlock the full potential of Yamana’s assets,” he added.

Nonetheless, Yamana’s board said in a statement that the joint Pan American Silver/Agnico Eagle offer – consisting of cash and stock totalling $4.8bn – was superior to Gold Fields’. Gold Fields’ bid is a scheme of arrangement in which it offered 0.6 of its shares for each Yamana share held.

But Yamana also continued to recommend Gold Fields’ offer whilst setting the South Africans five business days to submit a new offer that itself would constitute a superior offer.

In terms of the joint Agnico-Eagle, Pan American Silver offer Pan American would buy Yamana’s shares for $1bn in cash and 153.5 million sharess while Agnico would contribute 36.1 million of its shares. Yamana shareholders would therefore receive $1.0406 in cash, 0.0376 of an Agnico Share and 0.1598 of a Pan American Share for each share held.

Agnico-Eagle is Yamana’s joint venture partner in Canadian Malartic which would be 100% consolidated under its proposal.

Gold Fields’ shares surge

Shares in Gold Fields closed over 11% higher on the Johannesburg Stock Exchange – perhaps the surest sign yet of investor sentiment on its bid for Yamana which has received a mixed reception since unveiling on May 31. US-listed shares of Yamana surged 18% to $4.81 a share by midday in New York. Shares of Pan American Silver fell 5.4% while Agnico Eagle rose 3.9% in US trading.

Pan American is offering shares and Agnico Eagle will contribute $1bn cash and shares under the agreement.

Gold Fields said it would continue to work towards the completion of its transaction for the benefit of the shareholders of both companies.

“The two deals on the table are not too far off, especially considering the $300m break fee Yamana would have to pay Gold Fields,” Credit Suisse analyst Jessica Xu said in a note cited by Bloomberg News.

René Hochreiter, an analyst for Noah Capital said it was unlikely Gold Fields would enter a bidding war given “the negativity of the deal in the first place”. He added it might be hard for the group to conclude a deal it had been working on all year.

“Gold Fields has said it wil pursue the deal but if the bid is higher and part in cash then it will get very difficult for Gold Fields,” said Hochreiter.

He added that Gold Fields could well have been “saved” by the emergence of the rival offer given it was unpopular with shareholders. “It will now not have to pay a share “premium” for the acquisition if the merger falls through,” he said.

Speaking last week, Griffith said that Gold Fields had lined up other options in the event it failed to get the required 75% approval among shareholders at a general meeting planned for November 22.

“We don’t have to jump off the balcony if this deal doesn’t go through,” he said. “We are in a position of strength at the moment, but there are other options out there.”