Eldorado Gold Corp. agreed to buy European Goldfields Ltd. for about C$2.5 billion ($2.4 billion) in shares and cash to add reserves in Europe, in the Canadian company?s biggest acquisition.
The offer values European Goldfields at the equivalent of C$13.08 a share, the Vancouver-based company said today in a statement. That?s 10 percent more than the Whitehorse, Canada- based company?s closing price on Dec. 16 and 31 percent more than its close on Dec. 5 before it revealed it had received takeover offers.
The acquisition will add a mine and projects in Greece, Romania and Turkey and help more than double annual output by 2015, Eldorado said. Gold has climbed for 10 years and reached a record $1,923.70 an ounce on Sept. 6 in New York.
The deal ?adds more growth at lower cash costs,? Brad Humphrey, a mining analyst at Raymond James Ltd., said by phone from Toronto today. Humphrey has an ?outperform? rating on Eldorado.
The bid is priced at 5.1 times European Goldfields?s total assets compared with 2.2 times for 10 comparable deals, according to data compiled by Bloomberg. Eldorado is the fifth- biggest gold company in Canada by market value.
Eldorado?s Australian-traded shares dropped 3.4 percent to A$14.30 at 12:13 p.m. in Sydney, taking their decline for the year to 21 percent. European Goldfields has dropped 15 percent over the same period.
The offer, agreed to by both boards, is backed by BlackRock Investment Management (UK) Ltd., which owns a 7.3 percent stake in European Goldfields, according to the Canadian company.
?Integration of European Goldfields? business in the Aegean region and the combined business will constitute the leading low cost, high growth intermediate gold producer globally,? Eldorado Chief Executive Officer Paul Wright said in the statement.
The combined company will have gold production of 650,000 ounces, which will rise to more than 1.5 million ounces by 2015 as projects come into production, European Goldfields said. The company?s dividend will remain unchanged ?with enhanced ability for growth? as European Goldfields? development projects are built, Eldorado said.
The proposal requires approval of two-thirds of European Goldfields shareholders at a meeting planned for mid-February. Eldorado offered 0.85 of its shares and 0.001 Canadian cent for each share of European Goldfields. European Goldfields will postpone a Dec. 22 shareholders meeting that had been scheduled to approve a financing transaction with Qatar Holding LLC until after the shareholders vote on the acquisition.
Prior to this deal, Eldorado?s biggest acquisition was the takeover of Sino Gold Mining Ltd. in 2009.
European Goldfields had surged since Dec. 6, when it said it had received ?preliminary and indicative approaches from third parties? regarding potential deals. Centerra Gold Inc., a Toronto-based gold producer, expressed interest in the company, the London-based Sunday Times reported on Dec. 11, citing unidentified sources.
The Whitehorse-based company operates the Stratoni mine and is developing the Skouries and Olympias projects in Greece. The company also has a project in Romania.