The Barrick Gold Corporation (NYSE:ABX) announced Monday that it would acquire Equinox Minerals (TSE:EQN) for 7.3 billion Canadian dollars, or $7.8 billion USD. The offer values Equinox Minerals at 8.15 Canadian dollars a share, a 30 percent premium on the price it was trading at on Feb. 25 when the company announced a bid for the Lundin Mining Corporation. That bid has now been withdrawn as part of Equinox’s recent all-cash agreement with Barrick, unanimously approved by the Equinox board.
According to a recent press release from Barrick, “The Offer also represents a 16% premium over the per share price under the offer for Equinox proposed by Minmetals Resources Ltd. (HKG: 1208) on April 3, 2011.” However, Minmetals, a Chinese company, has yet to make a formal bid, and it is unclear whether they will continue to pursue Equinox in a bidding war.
“The transaction is expected to be immediately accretive to cash flow and earnings on a per share basis,” said Aaron Regent, President and CEO of Barrick (NYSE:ABX). “It does not dilute our shareholders’ gold exposure per share, and it enhances copper exposure and leverage per share in a strong copper price environment.” Furthermore, CIBC World Markets Inc., Goldman Sachs & Co., and TD Securities Inc., all financial advisors to Barrick, have determined that the offer is fair, from a financial point of view, to Equinox’s shareholders.
While the deal hasn’t gone through, Equinox has agreed not to accept offers from any other companies, instead giving Barrick the opportunity to match any other solicited bids it receives, also agreeing to a 250 million Canadian dollar fine if Equinox should at any point withdraw from the takeover.
The announcement comes at the heels of a commodities boom, with ever-increasing in value Gold (NYSE:GLD) reaching a new high of $1,518 an ounce. However, copper prices are down amid concern for credit conditions in China (NYSE:FXI), which consumes 40 percent of the world’s copper. Equinox owns the Lumwana copper and uranium mine in Zambia, the third largest in Africa, as well as Jabal Sayid copper deposits in Saudi Arabia.
Still, it is rare that top mines come on the market, and Barrick (NYSE:ABX) won’t lose their chance waiting for Copper prices to rise. “If you look at the top 20 mines in the world, this is the only one that’s actually available,” said Regent during a conference call Monday morning.
The offer is expected to commence April 26 and run for at least 35 days. Barrick (NYSE:ABX), which already owns 2 percent of shares in Equinox, must obtain acceptance of the offer from at least two-thirds of respecting shares on a fully diluted basis. Only then can it take the necessary steps to acquire any outstanding Equinox shares.
Barrick stock closed down 6.78% to 51.86 per share, while stock in Equinox is up 11.60% to 8.37 a share.
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