Workers at the Minera Florida mine, in the village of Alhue in central Chile, on Feb. 19, 2009.VICTOR RUIZ CABALLERO/REUTERS
Gold Fields Ltd.’s GFI-N all-share takeover offer for Canada’s Yamana Gold Inc. YRI-T has run into turbulence, with investors in the venerable South African gold major worried about the lack of obvious cost savings, the dilution in their shareholdings and the rich premium it is offering for Yamana.
On Tuesday, Johannesburg-based Gold Fields said it had reached a friendly agreement to acquire Toronto-based Yamana for US$6.7-billion. Yamana shareholders are set to receive 0.6 of a Gold Fields share for each of their Yamana shares, which equated to a premium of 42 per cent over the market price last Friday on the New York Stock Exchange.
Founded in 1887 by British statesman Cecil Rhodes, Gold Fields is one of the world’s oldest gold mining companies. As extracting gold from South Africa’s deep mines has become increasingly high cost, and amid a difficult political climate, Gold Fields has diversified outside of its home country.
While the three-kilometres-deep South Deep gold mine in South Africa is still a core operation with decades of production ahead of it, the company’s portfolio now also includes mines in South America, Australia and West Africa.
Buying Yamana will elevate Gold Fields to the fourth-biggest global gold miner, with projected annual gold production of 3.4 million ounces.
“The rationale for the deal is consistent with other gold M&A in recent years, namely achieving scale for relevance to investors, as well as geographic diversification,” Fahad Tariq, an analyst with Credit Suisse, wrote in a note to clients.
Over the past few years, investors have rewarded acquirers for doing low or no-premium deals, such as Barrick Gold Corp.’s 2019 nil premium purchase of Randgold Resources Ltd., while they have punished those that dared to pay big premiums.
Last year, Fortuna Silver Mines Inc., which proposed a 40-per-cent premium takeover of Roxgold Inc. lost a fifth of its value on the day the deal was announced. Similarly, investors in Gold Fields took flight on Tuesday, driving its share price down 23.4 per cent in trading on the NYSE.
Josh Wolfson, director of global mining research at RBC Capital Markets, wrote in a note that the deal may make Gold Fields a “more relevant” gold investment over the long term. But given the sizable premium it is offering for Yamana, and the material dilution of Gold Fields’ own shares the deal entails, the shorter-term picture isn’t pretty.
“The motivation and merits of a transaction of this scale to Gold Fields in our view is not immediately justified,” he wrote.
Chris Griffith, chief executive officer of Gold Fields, said one of the main reasons for buying Yamana is that the miner’s production will grow over the long term, as opposed to falling after 2024 because of depletion.
“We’re thinking about the strategy of the company,” Mr. Griffith said in a conference call with analysts, “making sure that whatever we do is enhancing the pipeline.”
Yamana Gold was founded by former investment banker Peter Marrone in 2003. The miner produced 885,000 ounces of gold and 9.2 million ounces of silver last year. Its most valuable asset is its 50-per-cent stake in the massive Malartic mine in Quebec, which it co-owns with Agnico Eagle Mines Ltd. Yamana also owns smaller gold mines in Brazil, Chile and Argentina.
Before the deal was announced, Yamana shares had risen by 27 per cent this year, but were trading about 65 per cent below their all-time high, reached in 2012. The sizable discount had irked the company.
“The market is not reflecting our inherent fair value,” Mr. Marrone, executive chairman of Yamana, said in a conference call with analysts, as one justification for agreeing to sell the company.
Mr. Marrone added that Yamana will benefit from Gold Fields’ deep underground mining experience, and owing to the acquirer’s bigger size, the combined company should be in a better position to finance new mines.
He is also set to potentially receive a massive severance payout as part of the acquisition by Gold Fields. Yamana estimated in a regulatory filing earlier this year Mr. Marrone would receive cash severance of US$13.35-million if Yamana was acquired and he subsequently lost his job.
In such circumstances, Mr. Marrone would receive early access to long-term stock awards as well. Based on his current share ownership as disclosed in regulatory filings, those would be valued at $31.1-million at $6.80 a TSX-listed share, bringing his total exit package to just under $48-million.
Mr. Marrone has been criticized in the past for excessive compensation. In 2015, he lost a say-on-pay vote by Yamana shareholders. In 2019, proxy advisory service Glass Lewis gave Yamana a grade of F for compensation, and wrote the company had “a history of misaligning pay and performance.”
Mr. Marrone declined an interview request from The Globe and Mail.
Yamana shares closed at $6.80 on the Toronto Stock Exchange.
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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
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