TORONTO – A merger between Quebec-based ECU Silver Mining Inc. (TSX:ECU) and Golden Minerals of Chicago will keep the Golden Minerals (TSX:AUM) name and be headed by its chief executive officer, the companies said Friday.
The combined company, in which current ECU shareholders will have 51 per cent of the common stock, will also keep its headquarters in Golden, Colo., according to a joint news release.
Under the terms of the transaction, each ECU share will be exchanged for 0.05 Golden Minerals shares and a fraction of a penny representing an aggregate total cash payout of $125,000.
Based on Golden’s previous closing stock price, the exchange ratio represents a premium of about seven per cent to the 20-day volume weighted average price for ECU stock.
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The merger will create a “new leading junior silver mining company” with a portfolio of growth projects, primarily in Mexico and Argentina and with a combined market capitalization of $600 million.
The deal, which is supported by boards of both Golden and ECE, requires approval by two thirds of shareholders of both companies. The Sentient Group, one of Golden Minerals’ largest stockholders with 19 per cent stake, has indicated it intends to vote in favour of the transaction.
“Sentient has also expressed an interest in investing further capital in the combined company to retain its current proportionate ownership, although no agreement has been reached,” the release said.
Upon completion of the transaction, the combined company will have approximately 31.2 million shares outstanding and 34.2 million on a fully-diluted basis. On a fully diluted bases, ECU shareholders will hold 55 per and Golden shareholders 45 per cent.
Golden Minerals CEO Jeffrey Clevenger, who will maintain his role, called the deal “a unique opportunity for the shareholders of both companies to participate in the creation of a new silver mining company with an attractive pipeline for further growth.”
Michel Roy, chairman and CEO of ECU, said it was “a true merger of equals and provides the shareholders of both companies an opportunity to participate in a uniquely positioned silver mining company.”
“Golden Minerals’ and ECU’s asset portfolios and management teams are highly complementary and provide both companies with increased opportunities to leverage the extensive, highly prospective projects in Mexico, Argentina and Peru,” Roy said.
Trading in both companies was halted on the Toronto Stock Exchange pending the announced. When trading resumed, ECU stock was down eight cents, or 7.69 per cent, at 96 cents, while Golden Minerals was down 40 cents, or two per cent, at $19.98.
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