Ideal Business Consultants

Vancouver-based Pan American Silver (TSX: PAA, Nasdaq: PAAS) entered into a definitive agreement to acquire compatriot Minefinders (TSX: MFL, Amex: MFN) via a plan of arrangement in a deal that implies a total transaction value of approximately Cdn$1.5bn (US$1.49bn), the firms said Monday in a joint statement.

Under the terms of the agreement, Minefinders shareholders can elect to receive 0.55 of a Pan American share and Cdn$1.84 in cash, or 0.6235 of a Pan American share or Cdn$15.60 in cash, subject to pro-ration under total aggregate cash and share pools of approximately Cdn$176mn and 53mn shares, respectively, on a fully diluted basis for each Minefinders share held, the statement said.

The value represents a premium of 36% to Minefinders’ January 20 closing price on the TSX.

Upon completion, existing Minefinders shareholders will own approximately 33% of Pan American on a fully diluted basis. The combined company will be one of the world’s largest diversified silver miners by market cap, which would be approximately Cdn$4bn.

Combined production – which totaled 26Moz silver in 2011, based on Pan American guidance and Minefinders’ disclosed results – is expected to exceed 50Moz by 2015.

The new company would have eight operating mines and based on expected silver production in 2011, approximately 52% of combined production will be from operations in Mexico, 21% from Peru, 15% from Argentina and 12% from Bolivia.

The combined firm will also have proven and probable reserves of approximately 350Moz silver and 3.0Moz gold.

The boards of both companies have unanimously determined that the transaction is fair and in the best interest of their firms and recommended that security holders vote in favor of the deal.

The proposed takeover is subject to the approval of at least two-thirds of the votes cast by Minefinders security holders and a majority of votes cast by Pan American shareholders at special meetings expected to be held in March.

If approved, the transaction is anticipated to be completed by the end of March.

The takeover is also subject to stock exchange, regulatory and court approvals and the satisfaction of certain customary conditions.

In addition, if Minefinders agrees to a superior proposal, Pan American will have five business days to match it.

Pan American has seven operating mines in Mexico, Peru, Argentina and Bolivia. The firm also owns the Navidad project in Argentina and is the operator of the La Preciosa project in Mexico, a JV with compatriot Orko Silver (TSX-V: OK).

Minefinders posted revenues of US$241mn in 2011 as gold equivalent sales more than doubled to 155,498oz from 75,767oz in 2010.

Output from the Dolores mine in Mexico totaled 74,193oz gold and 3.57Moz silver, compared to 56,110oz and 1.22Moz, respectively.

To read the full statement, go to this link

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