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Homestake to Buy Santa Fe Pacific

Metals: $2.3-billion deal would create second-largest gold producer in North America.

December 10, 1996|From Reuters

Homestake Mining Co. agreed to buy Santa Fe Pacific Gold Corp. for $2.3 billion, outbidding Newmont Mining Corp. in a deal that would create the second-largest gold producer in North America, the companies said Monday.

Santa Fe Chairman Patrick James said the companies had been talking about a transaction since March and Homestake made a formal bid in early November.

James, who would become president and chief operating officer of the combined company, said Santa Fe proceeded with its merger with San Francisco-based Homestake after deciding to reject Newmont Mining's less-lucrative, unsolicited bid, which it made public last Thursday.

He also said Albuquerque, N.M.-based Santa Fe entered a confidentiality agreement with Newmont prior to Newmont's announcement of its bid. Typically, a confidentiality agreement gives a suitor access to nonpublic information in order to formulate a bid that adequately reflects a target's value.

Homestake said it expected to take $50 million in one-time charges related to the Santa Fe deal, half of which will be related to transaction fees and half to employee severance costs.

Jack Thompson, Homestake president and chief executive who would become chairman and CEO of the merged companies, said he expected the combined companies to have $260 million in capital expenditures next year.

Under terms of an agreement approved by the boards of both companies, Santa Fe shareholders would receive 1.115 newly issued Homestake common shares for each Santa Fe common share.

Each Santa Fe share would be worth $17.42 share, based on Homestake's closing stock price Friday. Newmont's all-stock bid was valued at $15.55 a share.

Santa Fe shares rose $1 to close at $16.375, Newmont was unchanged at $46.25 and Homestake lost 87.5 cents to close at $14.75, all on the New York Stock Exchange.

"This is an ideal transaction for the shareholders of both companies," Thompson said. "Santa Fe's shareholders get a full and fair price, representing a 47% premium to last Wednesday's unaffected market price for their shares, and the potential upside of owning half of a dynamic new gold company."

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