Speculation that rival bidder could emerge
Toronto-based Kirkland Lake Gold Ltd. chief executive Anthony Makuch said on Monday his company is not interested in raising or changing the offer it made last month to purchase Detour Gold Corp., after one analyst speculated that a new bidder may emerge.
In November, Kirkland announced an all-stock buyout that valued Detour shares at $27.50, or about a 24 per cent premium to its prior closing price, and pegged the entire transaction at about $4.89 billion.
Both companies operate gold mines in eastern Ontario, but have had starkly different trajectories over the past three years. Kirkland operates two high grade underground mines, including one in Australia, that produce gold at some of the lowest costs in the sector, and has been one of the best performing stocks on the TSX during that time.
Detour, which operates a single lower-grade, open pit mine, at some of the highest costs in the sector, faced an activist battle with one of its largest shareholders, U.S. hedge fund billionaire John Paulson in the second half of 2018, who waged a successful campaign to oust the board of directors and management on the basis that the company had failed to perform.
Since the deal was announced, however, Kirkland’s stock has declined by 15 per cent to $53.77 and Detour’s stock has risen 9.5 per cent, closing at $24.34 Monday. The opposing investor reactions to the deal not only erased any premium for Detour shareholders, but also lifted Detour shares above the deal’s proposed .4343 to 1 exchange rate for Kirkland shares, or about $23.35.