(Bloomberg) — Tahoe Resources Inc. agreed to buy Rio Alto Mining Ltd. for about C$1.35 billion ($1.09 billion) to add the La Arena mine in Peru in the gold industry’s biggest takeover in almost 10 months.
The cash-and-stock offer is valued at C$4 a share, or 22 percent more than Vancouver-based Rio Alto’s Feb. 6 closing share price, both companies said Monday in a statement.
Unlike many other precious-metal miners struggling amid recent commodity-price declines, Tahoe has gained financial strength after its Escobal silver mine in Guatemala started commercial production in January. The Reno, Nevada-based company’s cash balance jumped more than eightfold in the first three quarters of 2014. It announced its first dividend payment in November.
The enlarged company will have no net debt and its market capitalization will appeal to a larger group of institutional investors, attract more coverage from analysts and improve share trading liquidity, Tahoe and Rio Alto said.
“The combination would arguably create an intermediate multi-mine producer with low production costs, a strong balance sheet with net cash, and with a genuine growth profile,” said Daniel Earle, a Toronto-based analyst at TD Securities Inc.
Rio Alto Chief Executive Officer Alex Black will lead the combined company while Tahoe CEO Kevin McArthur will become executive chairman.
Black’s appointment “significantly strengthens the management group long term,” Earle said in a note. “Black has, in our view, established himself as a star in the institutional community with the emergence of Rio Alto.”
Break Fee
Investors will get 0.227 of a Tahoe share and 0.1 of a Canadian cent for each Rio Alto share. The deal, which is expected to be completed in early April, includes a C$57.6 million termination fee payable to Tahoe under certain circumstances.
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