Hungry for Meridian, Yamana ups offer

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

Yamana raised the cash component of its offer by $0.85 per share to a total of $4 per share — roughly 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 Aug. 14 conference call, Peter Marrone, Yamana’s chairman and chief executive officer, said the proposed deal would “create a dominant intermediate gold company” that would be fully funded, debt-free, and boast a return on invested capital “that is among the highest in the industry.”

“It’s 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 loan from ABN Amro and Scotia Bank. The credit facility, obtained only for this offer, is a term loan amortizing equally over five years and only comes into play if Yamana acquires 66% of Meridian.

Yamana says the 5-year loan is on attractive terms and the company has the option of repaying it early. “The objective was to create a streamlined deal and provide certainty,” Marrone explained. “We’re trying to make this a more simple transaction.”

The terms of Yamana’s consensual deal with Northern Orion Resources (NNO-T) remain unchanged and shareholders are expected to vote on the plan on Aug. 22.

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

The news sent Yamana’s shares down 4.15% or 48 cents in Toronto on a trading volume of 5.6 million shares. Meridian shares fell 2.5% or 72 cents on a trading volume of 1.2 million shares, while Northern Orion Resources dropped 0.93% or 5 cents on a trading volume of 3.2 million shares.