GOLD Fields will not adjust its bid for Yamana Gold following the emergence last week of a rival joint bid by Agnico-Eagle and Pan American Silver, the South African company said today.
A board meeting over the weekend unanimously resolved that its all-share offer was “strategically and financially superior” than the joint bid, it said.
“The board was unanimous in its decision not to offer to change the terms of the transaction as we continue to believe our transaction is strategically and financially superior,” said Chris Griffith, CEO of Gold Fields in a statement.
“We believe in the highly complementary fit of Yamana’s operating assets and its extensive pipeline of future growth projects will create significant near-term and long-term value for the shareholders of both Gold Fields and Yamana when added to Gold Fields’ current portfolio of assets,” he added.
In terms of the rival joint offer Pan American Silver would buy Yamana’s shares for $1bn in cash and 153.5 million shares 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.
In comparison, Gold Fields is offering 0.6 of its shares for each Yamana share. At the time of its offer announcement on May 31 this represented a 35% premium – a much criticised consideration among some shareholders.
Nedbank analyst Arnold van Graan said in a note today that Gold Fields would have been “hard pressed” to increase its offer Yamana given the share price reaction following the emergence of its bid on May 31. Interestingly, the company’s shares gained about 11% on Friday when the joint offer emerged, and gained a further 3% in the first hour of Johannesburg trade today.
However, it may be the odds are stacked against Gold Fields, said Van Graan. “One would also have to consider whether Yamana shareholders (mostly US- and Canada-based) would be more comfortable owning Agnico and Pan shares, as opposed to Gold Fields’ American depository receipts (ADRs),” he said.
Unathi Loos, portfolio manager at Ninety One in Cape Town which is a Gold Fields shareholder, told Reuters on Friday she would view a higher offer by the miner as a negative. “Their original [offer] was already at a premium and shareholders would no doubt want to see capital allocation discipline,” she said.
Gold Fields shareholders are due to meet on November 22 to vote on their company’s offer for Yamana with Yamana shareholders scheduled to meet the day before.