Hungry for Meridian, Yamana ups cash component of offer

Six weeks after Yamana Gold (YRI-T, AUY-N, YAU-L) announced its original proposal to merge and take over Meridian Gold (MNG-T, MDG-N), the company announced on August 14 that it has upped the cash component of its offer, waived the due diligence access condition and extended the offer deadline to September 7.

Yamana raised the cash component of its offer by $0.85 per share to a total of $4 per share approximately a 27% increase in the cash portion of the deal. Meridian shareholders will be entitled to receive 2.235 of a Yamana common share plus $4 in cash.

During an August 14 conference call, Peter Marrone, Yamanas chairman and chief executive officer, said the proposed deal would create a dominant intermediate gold company that will be fully-funded, debt-free, and boast a return on invested capital that is among the highest in the industry.

Its a mix of exceptional assets, he explained. This is an enviable portfolio of assets. This makes a better company and deserves a better value. That is really the message.

The cash portion of the deal will come from a new $400 million acquisition five-year credit facility from ABN Amro and Scotia Bank. The credit facility, obtained only for this offer, is a term loan amortizing equally over a five-year period. It is acquisition financing specific, so it only comes into play when Yamana acquires 66%.

The company says the five-year facility is on very attractive terms and Yamana has the option of repaying it early. The objective was to create a streamlined deal and provide certainty, Marrone explained. Were trying to make this a more simple transaction.

The terms of Yamanas consensual deal with Northern Orion Resources (NNO-T, NTO-A) remain unchanged and shareholders are expected to vote on the plan on August 22.

If the two proposed acquisitions go ahead, they would increase Yamanas annual gold production to more than 1.4 million oz. gold by 2009, up from a combined base in 2006 of about 660,000 oz. Meridian has world-class mining operations in Chile and Nevada and a pipeline of promising exploration projects throughout the Americas.

The news sent Yamana’s shares down 4.2% or 48 cents in Toronto on a trading volume of 5.6 million shares. Meridian’s shares fell 2.5% or 72 cents on a trading volume of 1.2 million shares, while those of Northern Orion Resources dropped 0.93% or 5 cents on a trading volume of 3.2 million shares.