Hecla to Buy Gold Producer Aurizon for $761 Million
Hecla Mining Co. (HL), which operates silver mines in Alaska and Idaho, agreed to buy gold producer Aurizon Mines Ltd. (ARZ) for about C$781.7 million ($760.7 million) in a cash-and-stock deal that it says trumps a rival offer.
Aurizon investors will receive C$4.75 in cash or 0.9953 of Hecla stock for each share they own, Coeur D’Alene, Idaho-based Hecla said today in a statement. Aurizon’s board unanimously backed the Hecla offer and its directors and senior officers have agreed to vote their shares in favor of the deal, it said.
“It’s an asset that has grade and once we get through the construction of the shaft we’ll ramp up its production, we’ll see good returns on the investment from the get-go,” Hecla Chief Executive Officer Phil Baker said in a phone interview, referring to Aurizon’s sole operating mine, Casa Berardi in Quebec. “It has a very large land package where we’ll see, we think, exploration success. There’s real value that’s here and we want to be a part of it.”
Alamos Gold Inc. (AGI), the biggest shareholder in Aurizon with a 16 percent stake, offered C$4.65 or 0.2801 of a share for the Vancouver-based company in an unsolicited bid in January that Aurizon rejected. Toronto-based Alamos won’t increase its bid, the company said today in a statement.
“The company that would be created by the combination of Alamos and Aurizon represents far greater value than the highly leveraged, hedged, debt-laden, financially constrained company proposed by the Aurizon board through the Hecla merger,” Alamos Chief Executive Officer John McCluskey said in the statement released after regular trading ended in New York and Toronto.
Aurizon rose 3.2 percent to C$4.49 at the close in Toronto, while Alamos rose 0.9 percent to C$14.24. Hecla fell 12 percent to $4.07 in New York.
The Aurizon bid is Hecla’s latest attempt to increase scale through acquisitions, adding underground mines similar to the ones Hecla already operates and reducing the company’s exposure to base metals by boosting gold production, said Andrew Kaip, an analyst at BMO Capital Markets in Toronto. Aurizon owns eight properties in Quebec.
“It provides them another operation underground, which is their expertise, in a safe jurisdiction,” Kaip said today in a telephone interview.
Hecla’s proposed cash offer values Aurizon at 9.2 percent more than the closing price on March 1. Hecla is offering as much as C$513.6 million in cash and as many as 57 million shares, according to the statement.
Hecla has received a commitment for $500 million in financing from Bank of Nova Scotia (BNS) and the transaction won’t require approval from its shareholders, the company said in the statement. Hecla said it has the right to match any competing offer.
The deal, which Hecla is seeking to complete in the second quarter, requires approval from two-thirds of Aurizon shareholders.
Hecla’s bid may be a stage of a bidding war, Heiko Ihle, an analyst at Euro Pacific Capital Inc. in Westport, Connecticut, wrote in a note today.
“We do not believe that this is the final chapter of a bidding war for Aurizon,” Ihle wrote. The board may announce another offer before the expiration of the poison pill this week, he said.
Aurizon said in January it had adopted a shareholder rights plan while it searched for alternatives to the Alamos offer.
Bank of America Corp. is advising Hecla on the transaction and Cassels Brock & Blackwell LLP is serving as Canadian legal counsel.
Aurizon is being advised by Scotia Capital Inc. and law firms DuMoulin Black LLP; Blake, Cassels & Graydon LLP; and Paul, Weiss, Rifkind, Wharton & Garrison LLP. CIBC World Markets and Blake, Cassels are advising the special committee of Aurizon’s board.
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