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Agnico Eagle, Pan American to buy Yamana Gold in $4.8bn deal

The Canadian Malartic in Quebec. (Image courtesy of Canadian Malartic Partnership.)

Agnico Eagle Mines (TSX, NYSE: AEM) and Pan American Silver (TSX, NASDAQ: PAAS) are buying fellow Canadian miner Yamana Gold (TSX: YRI), (NYSE: AUY), (LON: AUY) in a $4.8 billion cash-and-shares transaction.

Toronto-based Yamana said on Tuesday it had inked a deal with the two precious metals miners after South Africa’s Gold Fields (JSE, NYSE: GFI) waived on Monday its right to match the rival bid.

It added that the company’s board now unanimously recommends shareholders reject the Gold Fields takeover at a vote scheduled for November 21.

Gold Fields responded to Yamana’s change in recommendation on Tuesday by saying it was disappointed by the outcome. “We continue to believe that the transaction was a financially and strategically superior offer for shareholders of both Gold Fields and Yamana,” the company said.

The Johannesburg-based miner added it was terminating its arrangement agreement with Yamana, which will have to pay a $300 million break fee to Gold Fields for walking out of their deal within two business days.

“The emergence of another bid highlighted the value of [Yamana’s] assets and the need to respond to systemic strategic challenges facing the gold industry,” Yunus Suleman, chair of Gold Fields, said in the statement. “However, we are disciplined in how we assess the value of assets and opportunities, and we were not prepared to be drawn into a bidding war which would have been value destructive for our shareholders.”  

Gold Fields’ initial all-stock offer valued the target at $5bn (C$6.8bn), but a decline of the miner’s share price driven by investor disappointment at the deal and weaker gold prices brought the deal value down to about $4.2bn as of Thursday’s close.

Agnico and Pan American unveiled the rival stock and cash offer on Friday, which contemplates splitting Yamana’s assets in Latin America and Canada between them.

The Gold Fields-Yamana transaction would have created the world’s fourth-largest gold miner, surpassing Agnico Eagle. 

With the acquisition of Yamana Gold, Pan American will strengthen its position as a top precious metals producer in Latin America, while Agnico Eagle would consolidate its ownership of one of the world’s biggest gold mines, the Canadian Malartic in Quebec.