– Analysts see strategic rationale, but not at any price
– Gold price has fallen adding to uncertainty over M+A
– Share price move narrowed gap between deals
Johannesburg — The board of South Africa’s Gold Fields (GFIJ.J) will not change its offer for Yamana Gold (YRI.TO) after a surprise rival bid from Agnico Eagle (AEM.TO) and Pan American (PAAS.TO), it said on Monday.
Gold Fields’ decision reflects “commitment to capital discipline” and to fairness for shareholders in Gold Fields and Yamana, the South Africa-listed miner said on Monday.
The joint cash and stock offer from Agnico Eagle and Pan American on Friday trumped the Gold Fields bid, which valued Yamana at around $4.2 billion at Thursday’s close. Under the offer, Yamana shareholders would receive $1.0406 in cash, 0.0376 of an Agnico share and 0.1598 of a Pan American share for each share held.
“We do not believe GFI (Gold Fields) is looking to acquire Yamana at all costs despite the strategic rationale,” Investec analysts wrote in a note.
If Gold Fields matches the Agnico/Pan American offer, it would raise the risk the company would not win the necessary backing of 75% of shareholders, the analysts said.
Share price moves on Friday – with Gold Fields shares jumping 11% and Pan American shares falling by 4% – reduced the gap between the offers in terms of the implied value they give Yamana, but the cash component in the Agnico/Pan American bid could give it an edge for Yamana investors.
Gold Fields shares fell by 20% when it announced the all-stock deal in May, denting the deal’s appeal for Yamana shareholders. When first announced, it valued Yamana at $6.7 billion.
Gold Fields reiterated the stance it took on Friday, saying it would work towards completing the takeover ahead of shareholder votes on it in two weeks’ time.
The Agnico/Pan American offer would only become effective if Yamana shareholders vote against Gold Fields’ offer on Nov. 21. In that scenario, Yamana would have to pay Gold Fields a $300 million break fee.
The price of gold has fallen from around $2,000 an ounce in March to about $1,650 as central banks raise interest rates to combat inflation. That has driven gold miners’ shares down and thrown into doubt M&A potential in a sector investors say needs consolidation to reduce costs.
*Helen Reid, Editing: David Goodman & Barbara Lewis – Reuters
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