Meridian fails to find white knight to save it from Yamana

Meridian Gold (MNG-T, MDG-N) says its efforts to woo new suitors to save it from a $3.2-billion hostile takeover bid by Yamana Gold (YRI-T, AUY-N) have failed. But the company is continuing to resist Yamanas advances, even though its only protection – in the form of a poison pill provision – will expire within a matter of days.

The mid-tier gold miner has been trying to fend Yamana off since June, even before a formal offer was announced in July. But despite talks with unnamed gold companies, no rival offer has emerged.

“Although several parties expressed very serious interest in a potential acquisition of the company, each of them has now informed the company that, for their own internal reasons, they will not be submitting proposals at this time,” said Meridian chairman Brian Kennedy in a release. “This in no way changes the board’s view that holding Meridian Gold shares is a superior value proposition to Yamana’s inadequate offer.”

The cash-and-stock bid of 2.235 Yamana shares plus $4.00 for each Meridian share was worth about $31.69 in Friday afternoon trading, as both Yamana and Meridian shares fell on the news that there would be no bidding war. Originally, the cash portion of the bid was only $3.15 per share, but Yamana raised that to $4.00 on Aug. 14.

Yamana reported that nearly 4 million Meridian shares had been tendered to its bid as of Sept. 4; there are about 98 million shares outstanding.

Company chairman and CEO Peter Marrone says hes confident the bid — which Yamana says will result in an intermediate gold producer with a strong cash flow, diversified asset base and a focus on Latin America — will succeed.

The company took Meridian in front of the Ontario Securities Commission on Sept. 5, arguing for the removal of the shareholders’ rights plan on the basis that Meridian has had plenty of time to come up with an alternate bidder. The OSC sided with Yamana, ruling that Meridian’s shareholders rights plan will expire on Sept. 11 at 9 a.m.; Yamanas offer has been extended until the evening of Sept. 11.

The removal of the final obstacle to our offer provides increased certainty and accommodation for Meridian shareholders to fully consider the offer and tender to it, said Marrone in a statement.

At the hearing, one of Meridian’s financial advisors with BMO Capital Markets said two gold companies were expected to make rival bids by Sept. 7.

Meridian, which has mines in Chile and Nevada and exploration projects in North, Central and South America, has said it doesnt like the Yamana bid because of the companys exposure to copper.

If the Yamana acquisition goes through, it will be a three-way merger with Northern Orion Resources (NNO-T, NTO-X). If two-thirds of Meridian shareholders accept Yamanas bid, Yamana will first acquire Northern Orion in a stock swap worth more than $1.1 billion. The combined company would then acquire Meridian. Northern Orion shares responded positively to the news that the three-way was more likely; the stock moved up 16%, or 86, to $6.22 per share in the late afternoon.

Yamana shares traded at $12.39 apiece in early afternoon trading, down 5.5% while Meridian shares were 8.6% lower, or $2.91, at $30.77.