After failing to acquire two-thirds of Meridian Gold (MNG-T, MDG-N) shares by its deadline yesterday evening, Yamana Gold (YRI-T, AUY-N) has again extended its hostile bid for the Reno, Nev.-based company.
The cash-and-stock offer of $4.00 plus 2.235 Yamana shares per Meridian share will now expire on Sept. 24 at 8 p.m.
Meridian management continues to be unimpressed by the bid and shareholders appeared to be as well. Only 34% of Meridians outstanding shares were tendered by the deadline, which Meridian chairman Brian Kennedy interpreted as a resounding rejection of Yamanas inadequate offer.
The Yamana offer exposes tendering shareholders to significant risks based on increased base metal exposure, Yamanas consistent history of shareholder dilution, and an uncertain future, said Ed Dowling, Meridians CEO and president, in a statement. Our shareholders have had since June to consider Yamanas inadequate proposal and have clearly rejected it by an overwhelming margin.
Yamana says its bid represents a premium of about 27.6% based on both companies 20-day average closing prices in Toronto on June 27, when the offer was announced. However, Meridian argues that Yamanas calculation is misleading, and does not take into account a strong rally in the gold sector since June that has seen a 17.3% rise in the stock of mid-cap North American gold companies, and a 12.1% increase in the Philadelphia XAU, an index of precious metal companies that includes Meridian.
Assuming Meridian shares had risen at a comparable rate in the absence of a takeover bid, according to Meridians math, the premium of Yamanas offer is actually between 1% and 6%.
The offer has been sweetened once, in mid-August, when the cash portion of the bid climbed to $4.00 from $3.15 per share.
In a release, Yamana chairman and CEO Peter Marrone said the company believes the deal is in the best interest of all shareholders.
We are confident that tenders to the bid will continue to increase during this extension as more Meridian shareholders choose growth, value and performance, Marrone said.
Yamana won a victory last week when the Ontario Securities Commission ruled that Meridian had to drop its shareholders rights plan, agreeing with Yamana that Meridian had had enough time to come up with an alternate bidder. The poison pill expired yesterday morning.
Yamanas offer is actually part of a three-way merger deal. On the condition that two-thirds of Meridian shares are tendered to the offer, Yamana will first acquire South America-focused copper and gold producer Northern Orion Resources (NNO-T, NTO-X); the combined company would then buy Meridian.
On the TSX this afternoon, Yamana shares traded at $12.21 while Meridian shares were up slightly at $30.81. Northern Orion shares were most affected by the news, dropping 8%, or 51 to $5.79.
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