Kirkland Lake Gold (KLG.TO) has agreed to join forces with Newmarket Gold (NMI.TO 0.83%) in an all-stock deal worth about $1 billion.
Retail and institutional investors are likely to take a shine to both the deal and the new gold company, according to Andrew McCreath, BNN Markets Commentator and founder of Forge First Asset Management.
“This is a deal that is trying to make a stock more interesting to more shareholders … and also to lower the cost of production of the combined entity with a higher production base,” he said on Thursday.
Kirkland Lake Gold shares will be exchanged at a ratio of 2.1053 Newmarket shares per Kirkland share, the companies announced in a press release.
Once the deal closes, Newmarket shareholders will receive 0.475 shares of the combined company for each share held. Kirkland’s shareholders will emerge with 57% ownership of the merged company. The transaction is expected to close in the fourth quarter of this year, pending approvals.
Newmarket Gold has been on an aggressive expansion spree with the help of Eric Sprott – the noted gold bug. Sprott holds more than nine per cent of Newmarket’s shares and is also the chairman of Kirkland Lake Gold. “Clearly, Eric Sprott is driving the bus on making this transaction work,” said McCreath.
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