On November 25 Kirkland Lake Gold made an offer to buy all
of Detour Gold's shares.As a Kirkland Lake Gold shareholder I would like to know how this offer is progressing.The offer was for a 29% premium to the 20 day weighted average price of Detour Gold shares closing on November22, 2019.This premium is in line with other takeover offers in the gold patch.Every DGC shareholder will own .4343 shares of the new Kirkland Lake Gold shares.The exchange ratio implies a price of $27.50 for every Detour Gold share.So now the price of DGC shares should be at least $26 a share.
Detour Gold Shareholders
Kirkland Lake Gold has recently had a number of press releases telling shareholders about new high-grade mineralization at their Fosterville,Macassa and Northern Territory Australia mines.But there has been no news on how their Detour Gold offer is progressing.My last blog on KL on my Blogdaleupsome blog dated December10,2019 suggested that KL acquire up to 10% on the open market and then make a specific proposal to the Detour board.
On the other hand,if Kirkland Lake still intends to buy a major stake or all shares of Detour there should be some news on a large secondary issue of KL shares.In the extreme case if KL bought Detour Gold with all new shares about 90 million shares would need to be issued.This blog suggests that a better remedy would be a cash and share acquisition,especially as Kirkland Lake has large and growing cash balances.But the behaviour of the DGC share price suggests that they don't believe the acquisition will succeed.If they did then the price would be closer to the acquisition price of $27.50.The present price allows KL to acquire DGC shares cheaper and means that KL should own a substantial number of DGC shares.
No Secondary Issue;no Majority Stake
At this time the train is just leaving the proverbial station.However this blog believes that Kirkland Lake Gold has already purchased a substantial percentage of DGC shares.But this blog does not believe that Kirkland Lake will buy all DGC shares.That would mean issuing 89 million shares.Although a half cash and half share issuance is possible but not likely.It is true that Kirkland Lake has announced mailing a notice of a special meeting on January28 to vote on their proposal.But until their financial advisor BMO announces a healthy secondary issuance this blog sees only a minority position in Detour Gold.However if they have already acquired 10-20% of Detour outstanding shares by January 28 then the possibility of a substantial majority stake becomes more likely.Even with all the new mineralization discovered (including the Fosterville mine) this blog does not see all Detour Gold shares acquired.
