Agnico Eagle Mines Ltd (AEM.TO) and Pan American Silver Corp (PAAS.TO) swooped in with a joint bid for Yamana Gold (YRI.TO) on Friday, in an attempt to scupper Gold Fields’ (GFIJ.J) planned acquisition of the Canada-listed gold miner.
The cash and stock offer, valuing Yamana at around $4.8 billion, would see Agnico and Pan American split Yamana’s mines between them. 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.
South Africa’s Gold Fields had agreed to take over Yamana in an all-stock deal valuing it at $6.7 billion in May.
But a slump in its shares after the deal was announced dented the valuation and at Thursday’s close the all-stock offer valued Yamana at just north of $4 billion.
Yamana, whose shares were up 15% after news of the rival bid, said it had informed Gold Fields that the new offer was a “superior proposal”. Gold Fields has five business days to make a new offer should it wish to.
Gold Fields said on Friday its offer was “strategically and financially superior” and that it would continue to work towards completion of the deal. Gold Fields’ Johannesburg-listed shares jumped by 11.2%, their biggest one-day gain in 2-1/2 years, in a sign that the market believes the deal could be off.
Both Yamana and Gold Fields said shareholder votes on the deal would still go ahead on Nov 21 and Nov 22 respectively.
Unathi Loos, portfolio manager at Ninety One in Cape Town which is a Gold Fields shareholder, said she would view a higher offer by the miner as a negative.
“Their original [offer] was already at a premium and shareholders would no doubt want to see capital allocation discipline,” she said.
Gold Fields will update the market on the status of its bid after the weekend, a company spokesperson said.
Some investors had been highly critical of the deal, with a top 10 shareholder Redwheel Capital (RWC) on Thursday publishing a letter it sent to Gold Fields’ board in which it described the deal as a “major error”.
Yamana would have to pay Gold Fields $300 million if it opts for the Agnico/Pan American deal instead.
Given that potential penalty, and Gold Fields’ share price jump on Friday, the two offers on the table are not too far off, said Credit Suisse analyst Fahad Tariq.
Berenberg analysts said the new bid would have “clear operational synergies” for Agnico Eagle at Canadian Malartic, Canada’s biggest gold mine which Agnico owns jointly with Yamana.
“Yamana shareholders are likely to be attracted to the cash element of the deal, alongside the offering of Agnico Eagle shares,” they said in a note.
Agnico has been on a dealmaking streak, having acquired Kirkland Lake Gold in a $11 billion takeover last year.
Through the deal, Yamana shareholders would get exposure to the “potential reopening” of Pan American’s Escobal mine in Guatemala, the bidders said.
Pan American bought rival Tahoe Resources for $1.07 billion in 2019, a deal that centred on Pan American’s belief it could eventually re-open Escobal, the world’s second-largest silver mine.
Escobal was open for only three years before Tahoe closed it in 2017 amid a dispute with the indigenous population.
Shares in Pan American, which would take over four of Yamana’s mines under the proposed deal, were dropped 9.3% by 1700 GMT, while Agnico Eagle shares gained 1.3%.