Agnico Eagle to buy Kirkland Lake Gold in $13-billion all-stock deal - The Globe and Mail

Agnico Eagle Mines Ltd. is buying Kirkland Lake Gold Ltd. in an all-stock deal worth about $13-billion, that will see existing Agnico’s long-serving chief executive Sean Boyd move to executive chair, with Kirkland’s top executive Tony Makuch becoming the CEO of the merged entity.

Toronto-based Agnico will pay 0.7935 of its shares for each Kirkland share, valuing Kirkland at $50.06 a share, or more than $5 a share lower than its most recent close of $55.70 a share. Kirkland shares had risen steeply in the past few trading sessions after the mining blog IKN reported that a number of big mining companies were in contention to buy the company. Still, even without the recent runup in Kirkland’s shares, the takeover price doesn’t provide a huge premium. The price is about 1-per-cent higher than Kirkland’s average close over the 10-day period to last Friday.

Shares in Kirkland Gold were trading down by 9 per cent on the Toronto Stock Exchange, in early trading, while Agnico’s stock was off by about 1.8 per cent in early trading.

From the archives: Expect gold mining takeovers, but no takeover premiums

The deal will see two of the industry’s most highly valued companies combine, with mines located in some of the safest jurisdictions, including Canada and Australia.

Agnico’s reserves will rise to 48 million ounces of gold as a result of the deal, with the addition of long-life assets such as Kirkland’s Detour Lake mine in northern Ontario.

The new board will consist of seven directors from Agnico and six from Kirkland.

Mr. Boyd and Mr. Makuch found themselves on the defensive in a conference call with analysts on Tuesday morning. Josh Wolfson, mining analyst with RBC Dominion Securities Inc. raised concerns about the deal on multiple fronts. Mr. Wolfson questioned why Kirkland, which has been a star performer over the past few years, would want to sell itself at this juncture, given it has promised significant growth with its existing assets. He also wondered why Agnico, which has historically shied away from large risky M&A deals, would take such a big swing.

In response, Mr. Boyd said that Agnico will be acquiring only a small number of mines in Canada and Australia, which are some of the most mining-friendly jurisdictions in the world, and therefore its risk profile wasn’t rising.

While Kirkland’s existing growth opportunities are promising, Mr. Makuch acknowledged, he said the company would grow faster, if it is swallowed by Angico. He pointed in particular to Agnico’s LaRonde and Malartic mines in Quebec. The Malartic open pit mine is one of the biggest in the country and it is set to transition over time to an underground operation.

Both companies had been in discussions with each other about a possible deal for a few years, and Mr. Makuch said that Kirkland also talked to other companies before settling on Agnico as its acquirer.

Over the past few years, the global gold industry has consolidated rapidly with a number of large deals consummated, including Barrick Gold Corp. buying Randgold Resources Ltd. for US$6-billion and Newmont Corp. buying Goldcorp Inc. for US$10-billion. Investors have generally welcomed the deals with takeover premiums remaining low for the most part.

Agnico and Kirkland have both participated in M&A as well, with Kirkland buying Detour Gold Corp for $4.9-billion in 2019, and Agnico earlier this year buying junior miner TMAC Resources for $269-million.

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Agnico Eagle to buy Kirkland Lake Gold in $13-billion all-stock deal - The Globe and Mail
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