Gold Fields sweetens Yamana deal to win over investors
South Africa’s Gold Fields on Monday fielded questions from sceptical investors after the company promised higher dividends and a Toronto Stock Exchange (TSX) listing to sweeten its proposed takeover of Canada’s Yamana Gold.
The miner announced plans to acquire Yamana in an all-share deal valuing the Canada-listed miner at $6.7 billion on May 31, but market reaction was largely negative and Gold Fields shares plunged 20% on the day.
Gold Fields shareholders are expected to vote on the deal during the second week of October, company officials said on Monday.
The company, which has a primary listing on the Johannesburg Stock Exchange, said it would declare an interim and final dividend of up to 45% of normalised earnings each year, up from a previous payout range of 25% to 35%.
“It’s really to give comfort to shareholders that there is going to be cash returned to shareholders. It’s sending a message about our confidence in the deal,” Chief Executive Chris Griffith said.
Analysts at RBC Capital Markets expressed doubt that Monday’s announcement would sway sceptical investors.
“In our view, these changes are incremental in nature, we view no material variances from our prior transaction takeaways, and we view a high hurdle for transaction completion success remaining,” RBC said in a note.
Griffith argued that consolidation in the gold industry is just beginning and now is the time to snap up Yamana for its quality assets as miners face reserve replacement challenges.
“We think we are ahead of the curve, before you see a rise in competition and cost of M&A transactions in the gold industry,” Griffith told investors on a call.
Yamana Executive Chairman Peter Marrone, who jointly addressed investors with Griffith, said his company had considered other deals but that Gold Fields was the perfect fit.
“Each company had other options and none were as compelling as this transaction,” Marrone said.
Gold Fields shares were down 0.82% at the close. Yamana shares traded flat on the day, but are down 15% from the levels hit on the day the deal was announced.
Redwheel, one of the 10 biggest investors in Gold Fields, last month publicly told the miner to cancel the takeover, which it described as an expensive error with no guarantee of growth and profitability.
Griffith has argued the Yamana deal grows Gold Fields’ portfolio, giving it a foothold in Canada and possible cost savings in South America. Gold Fields has mines in South Africa, Australia, Ghana and Peru, as well as a project in Chile.