For many investors, there is no sweeter word than "buyout." Ever since the economic and market turmoil that sent many businesses to their knees in late 2008, mergers and acquisitions have been prominent; giving life to some struggling companies and beefing-up the portfolio of others.
There have been some big names involved in the recent past such as Microsoft (NASDAQ:MSFT) snatching Skype, but also countless other acquisitions have happened that don’t receive quite as much press. Yesterday, Fortis (TSX:FTS) agreed to acquire Central Vermont Public Service Corp. (NYSE:CV) for $470 million and Agnico-Eagle Mines (TSX:AEM) acquired 9.3% of Colibri Resource for $600,000.
On Friday, Constellation Energy Group (NYSE:CEG) agreed to acquire StarTex Power for $142.5 million. On Thursday, Skyworks Solutions (NASDAQ:SWKS) came to terms to acquire Advanced Analogic Technologies (NASDAQ:AATI) for $258.6 million. This is just a sampling, as the last five trading days have witnessed nearly 40 larger-scale merger/acquisition deals.
Today, another one, albeit smaller-scale, hit the books with Toronto-based Excellon Resources Inc. (TSX:EXN) and Vancouver-based Lateegra Gold Corp. (TSX-V:LRG) announcing that they have entered into an agreement pursuant to which Excellon will acquire all of the outstanding common shares of Lateegra.
Excellon is a mineral resource company operating in Durango and Zacatecas States, Mexico that is producing silver, lead and zinc from the high-grade manto Mineral Resource on its large Platosa Property, strategically located in the middle of the Mexican silver belt. Lateegra is a junior exploration company with gold exploration properties primarily located in northeastern Ontario and northwestern Quebec.
Lateegra holds interests in three promising gold properties, the DeSantis Mine Project in Timmins, Ontario, the Beschefer Project, near Matagami, Quebec and the Stoughton Project, near the Holt-Holloway Gold Mine. While speculative in most senses, Lateegra controls property and has options available to control large amounts of land with strong potential in some highly prolific gold-producing regions in Canada.
This strategic move, if completed through shareholder approval and other customary measures, puts Excellon and its shareholders in an excellent position to expand operations significantly in the mid-term.
While Lateegra has options to control several properties, its holdings are highlighted by its current 51% interest in the DeSantis gold mine property and its option to earn a 100% interest in the DeSantis Property and the contiguous DeSantis West property, both located in the heart of the prolific Timmins Camp in northeastern Ontario and covering approximately five kilometres of strike length within highly prospective volcanic stratigraphy on the north side of the Destor Porcupine Fault Zone.
The Timmins Camp has seen production in excess of 70 million ounces of gold since the early 1900s and includes active producers such as Goldcorp Inc., which produced 265,900 ounces of gold in 2010 from the Dome and Hoyle Pond mines, located 11 km and 50 km to the east and northeast of DeSantis, respectively; and Lake Shore Gold Corp., which commenced commercial production in January 2011 at the Timmins Mine, 14 kilometres west of the DeSantis Property, and targets 125,000 ounces of gold production during 2011.
Highlights of the transaction include Lateegra shareholders receiving 0.54 common shares of Excellon for each share of Lateegra owned, representing an implicit share price of LRG of $0.4644. This is a 27.2% premium to the previous day’s closing price and 45-day VWAP (volume-weighted average price) of LRG. Also, upon completion, Lateegra shareholders will own approximately 12 percent of Excellon on a fully-diluted basis.
Ultimately, what this transaction could do is expedite the process of exploring and developing the properties in Lateegra’s portfolio. Gold mining is not an inexpensive proposition and the combined strength of the two companies certainly should bode well for speeding-up the pace of unearthing precious minerals.
Summing in this mentality, the transaction provides "an opportunity for Lateegra shareholders to benefit from Excellon's production profile and exposure to current silver prices, its exploration potential, expertise, ability to finance exploration and significantly improved trading liquidity; and An opportunity for Excellon shareholders to benefit from exposure to prime exploration properties in the Timmins Gold Camp and Abitibi greenstone belt with geographic and precious metal diversification into another mining friendly, politically stable environment."
Neither Lateegra nor Excellon is seeing an extremely volatile day with the announced proposal as so many times is exhibited in the smaller firm seeing a huge spike in share price, but this is not really the true value of the proposition. Shares of Lateegra have moved up modestly today on notably increased volume and are holding approximately nine percent gains on the day (although still below the implicit price of 46 cents).
The true value of Excellon acquiring Lateegra and the benefit to the shareholders will not be seen until the prolific properties of Lateegra are more well-defined as to proven reserves and certainly upon production. Also notable is that shares of Excellon are well off six-month highs of $1.39 and could increase substantially over time, given the sizable growth of their portfolio and increased opportunity to become a player in the Canadian mineral market in addition to their Mexican operations.
Time will always tell in this sort of situation and this should be an interesting story to follow as shareholder voting will be taking place soon and the potential of other offers that could hit the street now that this one is laid out between the two companies.
Related Stories
