These two companies have entered into a definitive agreement to merge. The transaction is structured as a merger of equals with a transaction equity value of approximately $1.5 billion.
Under the terms of the merger, holders of Alamos shares will receive one share in the new company and $0.0001 in cash for each share held, and holders of AuRico shares will receive 0.5046 shares of the new company for each share held.
Also, a new company, to be named AuRico Metals, will be created to hold AuRico’s Kemess project. AuRico Metals will hold a 1.5% net smelter return royalty on the Young-Davidson mine and AuRico’s Fosterville and Stawell royalties, and it will be capitalized with $20 million of cash. After the completion of the merger, the combined company will own a 4.9% equity interest in the spin-off. The remaining shares of the spin-off will be distributed 50% each to former Alamos and AuRico shareholders.
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According to Merrill Lynch, AuRico and Alamos announced a friendly merger, with no premium. The combined company would produce 370,000 to 425,000 ounces of gold at an all-in sustaining cost of $1,070 per ounce in 2015, with the potential to grow to 700,000 ounce. The deal implies $954 per ounce enterprise value/Reserves, 20% discount to gold price versus -14% recent average. Other bidders could emerge.
John McCluskey, president and CEO of Alamos, said:
We are very pleased to bring this transaction forward to the benefit of both sets of shareholders. Alamos has remained disciplined in its growth initiatives, building and preserving a robust balance sheet for the right opportunity.
Scott Perry, president and CEO of AuRico stated:
This merger with Alamos represents a logical business combination that will create a premier intermediate gold producer with a diversified asset base that includes three low-cost producing mines, a significant organic growth profile, a pipeline of high-quality development projects, all of which is underpinned by a solid balance sheet and led by an experienced and proven management team.
Shares of AuRico were up 7.2% Monday, at $3.20 in a 52-week trading range of $2.52 to $4.69. The stock has a consensus analyst price target of $4.11.
Alamos shares were up about 5.6% to $6.22. The consensus price target is $7.83, and the 52-week trading range is $5.11 to $10.55.
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