Denver, Colo. — Following a third boost to its takeover bid for Meridian Gold (MNG-T, MDG-N), Yamana Gold (YRI-T, AUY-N, YAU-L) has finally won the backing of Meridian’s board, turning a hostile bid into a friendly one.
By increasing the cash component of its offer by 50 to $7 per share, in addition to 2.235 Yamana shares for each Meridian share, Yamana has secured a definitive support agreement with Meridian’s board of directors.
The cash portion of Yamana’s bid has risen from an original $3.15 per share in late June to $4 in August, then $6.50 just a week before the final increase.
At a press conference here announcing the agreement, Yamana Gold chairman and CEO Peter Marrone described the hostile-turned-friendly takeover bid as a “unique three-month period.”
The revised offer now places a spot premium of about 38% on Meridian, based on both companies’ closing prices on June 27. Yamana will look at its credit facilities to borrow about $700 million to fund the deal, which values Meridian at about $3.6 billion.
Both Marrone and Meridian president and CEO, Ed Dowling, agreed that the deal is about cash flow and earnings. They said the combined company would enjoy very low (negative) gold production costs, with silver and copper byproducts factored in, and would have a significantly broadened focus in the Americas.
“Peter has always wanted a consensual deal — he’s implored many times to do that,” Dowling said. “But our position has always been the same — it’s all about value. Based on the negotiations of last week, our board unanimously agreed to enter into this consensual acquisition and in the end, our board has done the right thing for shareholders.”
Yamana’s amended offer is conditional on 50.1% of Meridian’s issued and outstanding shares being tendered — down from two-thirds of Meridian shares, originally — as well as the usual legal and regulatory approvals. About 24.4 million Meridian shares had been tendered as of Sept. 19 (before the latest announcement and bid increase), representing about one-quarter of the total shares.
Northern Orion Resources (NNO-T, NTO-X), which is also part of the merger deal, and Yamana have amended their agreement to accommodate the revised Meridian offer. Shareholders of Northern Orion accepted a plan of arrangement in late August under which Northern Orion shareholders will receive 0.543 of a Yamana share plus 0.1 for each Northern Orion share, valuing Northern Orion at $6.90 per share, or about $1.4 billion fully diluted.
Yamana has producing mines in South and Central America, Meridian brings to the merger mines in Chile and Nevada, and exploration projects throughout the Americas, and Northern Orion Resources has copper-gold properties in Argentina.
The pro-forma production outlook for the combined company is about 1 million oz. gold this year, 1.2 million oz. in 2008, and more than 1.5 million oz. gold by 2009.
Yamana shares traded down 20-30 to around $12.30 on the announcement, while Meridian shares largely traded even on the day at about $34 apiece, and Northern Orion was off a dime at $6.45.
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