Kirkland Lake Gold Ltd’s C$4.4 billion ($3.4 billion) all-stock offer to buy rival Detour Gold Corp has won backing from two influential proxy advisory firms on grounds the target’s shareholders would reap benefits from a larger company, bolstering chances of the deal going ahead.
Detour Gold said on Thursday that Glass Lewis & Co and Institutional Shareholder Services Inc recommended shareholders vote for in favor of the takeover, which Kirkland has said will generate up to $100 million in annual savings and add 600,000 ounces to its annual capacity.
Kirkland in November offered 0.4343 share for each Detour Gold share amid a wave of gold sector consolidation. But Kirkland investors balked at the 24% premium, sending the shares down sharply.
ISS said Detour shareholders would benefit from holding a significant stake in a multi-asset gold miner with significantly lower production costs and a more favorable risk profile.
“The premium, albeit muted as a result of the post-announcement decline in the acquirer’s shares, also appears more meaningful in an M&A environment that promotes deals that offer synergies in the place of control premiums,” the firm said.
Glass Lewis said in a statement dated Jan. 15 that Kirkland’s proposal is in the best interests of Detour shareholders, giving them exposure to Kirkland’s high-quality assets as investors in a senior gold producer.
“The support of these leading independent proxy advisors further demonstrates that the transaction represents a compelling opportunity for our shareholders to participate in the creation of a diversified, low-cost and growth-oriented senior gold producer with enhanced financial flexibility,” Detour Chief Executive Mick McMullen said in a statement.
Shareholders of both companies are slated to vote Jan. 28.
($1 = 1.3036 Canadian dollars)
(By Jeff Lewis; Editing by Alex Richardson and Richard Chang)