Canadian silver mining company Pan American Silver Corp. (PAAS, PAA.TO) Wednesday agreed to acquire Aquiline Resources Inc. (AQI.TO) by making a formal bid, in a deal valued at about C$626 million. Pan American would also make an offer for each outstanding series of Aquiline warrants and the Aquiline convertible debenture.
The Board of Directors of Aquiline has unanimously determined that the Pan American share offer is fair to Aquiline's shareholders and the transaction is in the best interest of Aquiline, and will unanimously recommend that Aquiline shareholders tender their common shares to the share offer. Aquiline shareholders will own about 19% of the enlarged Pan American, once the deal closes. Pan American shareholders will not be required to vote on the transaction.
In a statement, president and chief executive officer of Pan American, Geoffrey Burns said, "We believe the acquisition of Aquiline provides a perfect match with Pan American's core strength as a developer and operator of primary silver mines. The Navidad project is one of the world's largest undeveloped silver deposits and we will bring all the skills, technology and experience we have gained commissioning or expanding five new mines in the last six years to its development and operation."
Aquiline Resources is an exploration and development company advancing one of the world's largest undeveloped silver deposits in Navidad, as well as a gold/silver deposit in Calcatreu, both in Argentina, and a gold deposit in Pico Machay, Peru. The Company's core strategy is to acquire high-grade precious metals deposits within the Americas.
Under the agreement, Vancouver-based Pan American will make a friendly offer to acquire Aquiline Resources by offering 0.2495 of a its common share plus 0.1 of its common share purchase warrant for each Aquiline common share. Further, Pan American will make separate offers to purchase Aquiline warrants and convertible debenture, and offer replacement securities with similar terms, adjusted by the 0.2495 exchange ratio.
The total consideration is valued at C$7.47 per Aquiline common share, representing a 36.6% premium to Aquiline closing price of C$5.47 on Tuesday on the Toronto Stock Exchange, and a 62% premium to 10-day volume-weighted average price. Each full warrant entitles the holder to purchase one Pan American common share at C$35.00 over the 5-year period from the date of first take-up of Aquiline shares.
However, the offers are conditional on the directors and senior officers of Aquiline entering into lock-up agreements with Pan American and agreeing to tender all of their Aquiline shares in support of the share offer. The share offer and each of the convertible securities offers are conditional upon a minimum of 66 2/3% of the outstanding Aquiline shares on a diluted basis being tendered to the share offer.
"This is a win-win transaction and the full Board of Aquiline and I believe that tendering into Pan American's offer is in the best interests of our shareholders, through both the attractive up-front premium and the opportunity to participate in the tremendous upside we see as the development of Navidad unfolds in an enlarged Pan American." director and chief executive officer of Aquiline, Marc Henderson added.
Following the closure of the deal, Pan American will gain Aquiline's Argentinian Navidad project, which is thought to be one of the world's largest underdeveloped silver deposits, as well as its Calcatreu gold and silver deposit in Argentina and a gold deposit in Peru. Pan American's silver resources will also increase to about 945 million ounces with this deal. Pan American noted that it would also be well on its way to producing 40 million ounces of silver annually.
Pan American's mission is to be the largest and lowest cost primary silver mining company, and to achieve this by constantly increasing silver production and silver reserves. The company's growth strategy is based on the continued increase of low cost silver production through the efficient operation and expansion of its existing mines, an aggressive exploration program and the acquisition and development of new silver-rich deposits. Pan American owns and operates eight silver mines in Peru, Mexico, Bolivia and Argentina.
In August, Pan American Silver reported a decline in earnings for the second quarter, despite a 7% increase in revenues, hurt in large part by higher expenses and lower mining operating earnings. Net income for the quarter slid to US$10.2 million or US$0.12 per share from US$21.4 million or US$0.26 per share in the prior-year quarter. Quarterly sales were US$111.4 million, up 7% from the same period last year.
In Wednesday's regular trading session, PAAS is currently trading at $24.58, down $1.34 or 5.17% on a volume of 1.99 million shares. In the past 52-week period, the stock has been trading in a range of $8.93 to $26.70.
On the Toronto Stock Exchange, PAA.TO is currently trading at C$25.30, down C$1.41 or 5.28% on a volume of 0.85 million shares, while AQI.TO is trading at C$6.60, up C$1.13 or 20.66% on a volume of 5.03 million shares.
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