Alamos Gold Inc. (AGI), a producer of the metal in Mexico, made an unsolicited takeover bid for Canada’s Aurizon Mines Ltd. (ARZ) for about C$780 million ($792 million) to add projects in the Abitibi region of northwestern Quebec.
Investors in Aurizon would get either C$4.65 or 0.2801 of an Alamos share for each share they own, Toronto-based Alamos said today in a statement. The cash offer is 36 percent more than Aurizon’s closing price in Toronto on Jan. 11. Alamos said it holds a 16 percent stake in Aurizon.
Aurizon is considering the proposal, Jennifer North, a spokeswoman for the Vancouver-based company, said during a phone interview. Aurizon rose 34 percent to C$4.57 at 12:55 p.m. in Toronto after earlier rising as much as 36 percent, the most intraday since May 23, 2006. Alamos fell 9.9 percent to C$15.25, the most intraday since June 28.
Aurizon has eight projects in Abitibi including the operating Casa Berardi mine, according to the company’s website. The bid is “opportunistic” given the decline in Aurizon’s shares, said Steven Green, an analyst at TD Securities Inc. in Toronto. The stock dropped 37 percent in the 12 months through Jan. 11 while the S&P/TSX Materials Index declined 13 percent.
“At surface it looks to be off-strategy,” Green, who has a buy recommendation on Alamos, said in a note. “Alamos is a low-cost, open-pit heap leach producer in Mexico and Turkey, while Aurizon is a high-cost underground producer in Quebec.”
Alamos, which operates the Mulatos mine in Mexico and develops projects in Turkey, said it first approached Aurizon in 2008, according to an Alamos filing today.
“We have made multiple approaches to Aurizon over the years,” Alamos Chief Executive Officer John McCluskey said on a conference call today. “There’s never been any interest on Aurizon’s side.”
The offer values Aurizon at 5.2 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That’s the same multiple as the median of five comparable gold-mining takeover bids in the past 12 months, the data also show.
Alamos won’t require its investors to vote on the deal, which is based on a maximum cash payout of C$305 million and as many 23.5 million shares being issued. The offer is dependent on Aurizon not adopting a shareholder-rights plan. Such a plan, also known as a poison pill, typically allows a company to issue new shares to block a takeover in the event of an unsolicited bid.
Dundee Capital Markets was Alamos’s financial adviser and Torys LLP was its legal adviser.
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