Gold Fields CEO hopes shareholders will publicly endorse Yamana acquisition as uncertainty swirls


The head of South African miner Gold Fields Ltd is hoping that some of its major shareholders will publicly endorse its acquisition of Canadian gold miner Yamana Gold Inc., as uncertainty swirls over whether the deal will succeed. Johannesburg-based Gold Fields in May reached a friendly agreement to acquire Yamana for US$6.7-billion in an all-stock deal. Gold Fields shares lost more than a fifth of their value on the day the deal was announced, and have lost around 35 per cent total in the interim, amid a broader sell-off in the gold mining sector. Some investors have been critical of Gold Fields’ intention to pay a 42-per-cent premium for Toronto-based Yamana, whose single biggest asset is a 50-per-cent share in Canadian Malartic, one of Canada’s biggest gold mines. So far, no major shareholders have publicly endorsed the deal, while one has voiced its disapproval. RWC Partners Ltd ., known as Redwheel, said after the deal was announced that Gold Fields had made a serious error, and called it a risky and expensive transaction. Redwheel declined to comment for this story. In a media call on Monday, Gold Fields’ chief executive officer, Chris Griffith, said he is hoping that a few of the major investors will eventually speak up and endorse the deal. “It always helps if you get some large shareholders that are prepared to do that,” he said. Mr. Griffith said that Gold Fields is “making good headway” in convincing shareholders of the merits of the deal. For Gold Fields, buying Yamana will help it overcome its declining growth and reserve profile. Last year, Yamana produced just under 885,000 ounces of gold and 9.2 million ounces of silver. Apart from Malartic, Yamana has several smaller gold mines in Brazil and Chile.


Shares in Yamana are trading about six per cent below the value of the offer based on the share ratio that Gold Fields is offering, which suggests continued uncertainty over whether the deal will succeed. “There is risk with this transaction,” said Josh Wolfson, analyst with RBC Dominion Securities Inc. “The risk remains the Gold Fields shareholder vote.” Shareholders in Gold Fields will vote on the deal on Nov 22 with the company needing to obtain 75 per cent of votes cast to succeed. Yamana shareholders vote on Nov 21 with two thirds of votes cast needed. Before agreeing to the acquisition by Gold Fields, Yamana engaged with five other firms to explore other M&A transactions. According to Yamana’s management information circular, one of the parties Yamana talked with ended up itself being acquired by another firm. A different company was willing to consider the purchase at a premium of a major asset from Yamana, but talks ceased when Yamana entered exclusive talks with Gold Fields. Early next month, proxy advisory firms Institutional Shareholder Services and Glass, Lewis & Co. will weigh in on the deal and advise shareholders to vote either for or against the transaction. Many institutional shareholders vote based on the recommendations of proxy advisory firms and the reports will have a “huge influence,” said Mr. Wolfson. Mr. Griffith said that Gold Fields will be meeting with proxy advisory firms later this week to present its case for the transaction.

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