Farallon Mining Ltd. announced some big news after the market closed Monday. The company has received a friendly, all cash takeover offer worth $409-million from Nyrstar NV, which has already been approved by its board of directors.
The companies may not be well known outside the mining world. Nyrstar is a Belgian-listed firm that mainly produces zinc and lead and has smelting and mining operations. Farallon is a Vancouver-based miner that owns the Campo Morado zinc mine in Mexico.
Nyrstar's offer represents a 20 per cent premium to Farallon's closing price on Friday (the stock was halted all day Monday). To fund the deal Nyrstar will use existing cash and also tap credit facilities.
"We believe the offer is fair from Farallon's perspective and that Nyrstar is offering a strategic premium," TD Securities analyst Craig Miller wrote in a report.
The news came out just as Farllon reported third quarter earnings. The company posted earnings per share of $0.00 and revenues of $28.5-million.
Looking at the company as a stand alone entity, TD said the results were negative. "The company's operating cash flow continues to be insufficient to fund its operating and development costs," Mr. Miller noted. It helps, then, that Nyrstar is coming in.
The takeover offer already has key shareholder support. Between Acuity Investment Management, Farallon's largest institutional shareholder, and the board of directors' holdings, 18.9 per cent of shareholders already approve the deal.
Paradigm Capital provided a fairness opinion to Farallon's board.
Tim Kiladze