Gold Fields won’t raise offer for Yamana Gold after rival bid

Gold Fields (NYSE: GFI; JSE: GFI) has ruled out the possibility of raising its offer for Yamana Gold (TSX: YRI; NYSE: AUY) after two Canadian miners teamed up last week and put an unsolicited US$4.8 billion bid on the table.

The cash-and-stock offer from Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Pan American Silver (TSX: PAAS; NASDAQ: PAAS) on Friday trumped Gold Fields’ bid, which valued Yamana at around US$4.2 billion at Thursday’s close.

“Gold Fields will continue to work towards completion of the transaction on its current terms for the benefit of the shareholders of both companies in accordance with the arrangement agreement,” it said on Monday.

The South African miner added its decision reflected “commitment to capital discipline” as well as fairness for shareholders in both the company and Yamana.

It also said its offer was “strategically and financially superior” to the deal presented by Pan American and Agnico Eagle.

The statement contradicts what the two Canadian miners said in their joint press release, which stated that Yamana’s board of directors has already accepted their offer as “superior.”

Gold deal of the year

Gold Fields, which offered to buy Yamana in May, sees the proposed takeover as the gold deal of the year. It would create the world’s fourth-largest gold miner, surpassing Agnico Eagle. 

The company reiterated that Yamana’s assets would create significant near-term and long-term value for the shareholders of both companies. 

The deal would help Gold Fields’ expand in the Americas, particularly in the Southern Hemisphere.

“That’s what the Yamana assets do, they tick all those boxes for us. They bring high quality assets in Canada, Chile and Brazil, with great pipeline projects in both Canada and Argentina in particular,” Griffith said in a presentation.

Walking away from the deal could impact the Johannesburg-based miner’s long-term growth outlook. Gold Fields has already faced investor criticism for the 33.8% premium it offered when its US$6.7-billion bid was announced.

Yamana’s website still has a banner on the landing page announcing the Gold Fields’ deal. Should their agreement be terminated, the Toronto-based miner would have to pay a $300–million break fee to Gold Fields.

Yamana shareholders are scheduled to vote on the deal on Nov. 21, while Gold Fields investors meet the next day.

“We do not believe Gold Fields is looking to acquire Yamana at all costs despite the strategic rationale,” Investec analysts wrote in a note.

If the company matches the Agnico-Pan American bid, it could risk not winning the necessary backing of 75% of its shareholders, they said.

The rival bid would see Pan American acquiring Yamana, while Agnico Eagle would hold the gold company’s Canadian assets. Pan American is offering shares to Yamana investors, while Agnico Eagle is offering shares and contributing $1 billion of cash. The deal would make Pan American a top precious metals miner in Latin America, while Agnico Eagle would consolidate its ownership of one of the world’s biggest gold mines, Canadian Malartic in Quebec.