Gold Fields’ $6.7bn Yamana bid hits pothole after fund manager reportedly derides deal

30 Oct 2022

Fund manager Van Eck, the biggest shareholder in Gold Fields and its takeover prospect Yamana, has derided the proposed merger, according to a report in Canada’s Globe and Mail newspaper. It remains to be seen if this pushback will scupper the deal.

Gold Fields’ $6.7-billion all-share bid for Canadian miner Yamana has hit a pothole of note, according to a report in Canada’s Globe and Mail newspaper.

The report cited Joe Foster, portfolio manager at Van Eck, a leading gold fund manager, as deriding the proposed merger and raising questions about the strategy. Van Eck’s views on the matter are not to be taken lightly: according to the Globe, it owns almost 6% of Gold Fields’ US-listed shares and 10.6% of Yamana, making it the biggest investor in both companies.

“It really was unexpected, and the market didn’t, and maybe still doesn’t, understand the strategy behind the deal,” the report cited Foster as saying. Foster also noted the “horrible market reaction” to the proposed merger.

Gold Fields’ share price initially tanked on the announcement at the end of May and it has not clawed back much of that lost ground since, amid a wider slump in the sector. At the market close on Friday, it was down by more than 20% since late May.

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Gold Fields had offered a stiff premium of well over 30% of Yamana’s market capitalisation at the time and an independent valuator has since placed a value on the Canadian company which is in line with that. CIBC World Markets valued Yamana’s assets at between $6.825-billion and $8.025-billion, according to a circular Gold Fields issued last week.

Yamana’s shareholders will deliver their verdict on 21 November, and Gold Fields’ shareholders on 22 November. For the transaction to be approved, 67% of Yamana’s shareholders and 75% of Gold Fields’ must give it the green light.

“While we note the comments made by Van Eck, we continue to believe that this acquisition is the right deal for Gold Fields’ shareholders as we look to the next phase of our strategy. We believe it will result in a winning combination of high-quality assets and world-class operators, which is well-placed to create sustainable, long-term value,” Gold Fields spokeperson Sven Lunsche told Business Maverick.

“From the beginning, we saw more upside in Yamana than the market was giving it credit for, and believe the independent valuation by CIBC in the circular backs our assessment, with even more upside. We have engaged with shareholders extensively in the past months and have had positive conversations, and hope they see the value we see,” Lunsche said.

Gold Fields sees the deal as key to future growth. Its only remaining project in the pipeline is its $900-million Salares Norte project in Chile, which remains on course despite the distraction posed by a colony of endangered chinchillas that the company has been trying to relocate.

But Chile as an investment destination under its newish and very left-wing government presents problems of its own that go beyond endangered rodents.

It remains to be seen if this pothole will stop the deal in its tracks or if it has enough traction to make it to the finish line. DM/BM

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