Johannesburg-based mining group Gold Fields has been forced to go back to the drawing board in its multibillion-rand pursuit of Yamana Gold after the Canadian-based company’s board indicated on Tuesday that it has accepted a rival joint bid by Agnico-Eagle and Pan American Silver.
Yamana owns and operates gold, silver and copper mines in Canada, Chile, Brazil and Argentina. The Toronto-based company currently produces about 1-million ounces of gold and silver from five mines in four countries.
The joint bid has offered $1-billion (R17.7-billion) in cash, plus about 153.5-million shares in Pan American, which is listed on Nasdaq. It further offered 36.1-million shares in Agnico Eagle, which is listed on New York Stock Exchange.
In comparison, Gold Fields is offering 0.6 of its shares for each Yamana share, implying a valuation of R103.8-billion. The deal, if concluded, would have seen Gold Fields’ shareholders own 61% of the combined group and Yamana shareholders the rest.
Yamana said it had accepted the joint bid and will advise its shareholders to vote for it in a meeting scheduled for November 21.
“The board has unanimously determined in good faith, after consultation with its outside financial and legal advisors, and upon the unanimous recommendation of the special committee of independent directors of the board, that the Agnico-Pan American transaction is a “Yamana superior proposal” in accordance with the terms of Gold Fields arrangement agreement,” Yamana said.
The decision by Yamana board marks a reversal of their earlier decision to back the Gold Fields offer. However, a rival bid by Agnico-Eagle and Pan American Silver on Friday put a wrench in the works and opened a door for a ferocious bidding war.
Gold Fields said on Monday that it will not adjust its $6.7-billion bid for Yamana Gold following the emergence of a rival bid.
However, in a statement on Tuesday in response to the announcement by Yamana that it will no longer support its proposal, Gold Fields seems to have opened the door for a possible counter offer.
“The Gold Fields investment committee will now be convened and Gold Fields will provide a further update to shareholders on the transaction following that meeting,” the company said.
Andrew Bahlmann, CEO of Deal Leaders International, said he does not think Gold Fields will enter into a bidding war for Yamana.
“I also believe Gold Fields would struggle to carry shareholders for a higher bid, especially given that there is a $300-million break fee Yamana would have to pay Gold Fields,” said Bahlmann.
“Gold Fields has already faced investor criticism over the initial 34% premium offered in the deal, though that premium was quite acceptable given South African miners are typically underrated by international standards.”
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