Tahoe Resources and Rio Alto Mining are forming a new intermediate precious metals producer after announcing today that the two were combining.
The estimated deal size is Can$1.2 billion. Under the terms of the arrangement agreement, all of the Rio Alto issued and outstanding common shares will be exchanged on the basis of 0.227 of a Tahoe common share and C$0.001 in cash per Rio Alto share. Upon completion of the transaction, existing Tahoe and Rio Alto shareholders will own approximately 65 percent and 35 percent of the combined company, respectively.
Kevin McArthur, current Vice Chair and Chief Executive Officer of Tahoe, will act as the Executive Chairman of the Board and Alex Black, current President and Chief Executive Officer of Rio Alto, will become the new Chief Executive Officer of the combined Company upon completion of the business combination. Ron Clayton will remain President and Chief Operating Officer of the combined company.
GMP Securities L.P. acted as financial advisor to Rio Alto and Davis LLP acted as its legal advisor. BMO Capital Markets acted as lead financial advisor to Tahoe.
In a news release Alex Black, President and Chief Executive Officer of Rio Alto, stated the benefits to the transaction.
“Escobal is truly a world-class silver mine, and we believe this transaction represents a logical combination of two complementary, low cost asset bases that will continue to generate strong free cash flows into the future,” said Black.
“In addition to Tahoe’s attractive dividend policy, this transaction positions our shareholders to realize superior returns as we become part of a larger and more diversified intermediate precious metals producer in the Americas with enhanced cash flow generating capability. We are highly excited about the prospects of the combined company,” he added.