TORONTO (CP) -- The CEO of Yamana Gold Inc. [TSX:YRI; NYSE:AUY] says he's confident that shareholders of Meridian Gold Inc. [TSX:MNG; NYSE:MDG] will accept his company's C$3.2-billion takeover offer, which expires Tuesday night, despite the opposition of Meridan's board.
Yamana chief executive Peter Marrone said in an interview Friday that it's difficult to believe Meridian's shareholders would refuse the offer of 2.235 shares of Yamana plus C$4 cash - currently worth C$31.92 in total - in exchange for each Meridian share.
''Once the transaction noise begins to disappear ... then they will tender to that bid,'' Marrone predicted.
Meridian saw its stock drop on the Toronto stock market after the company announced early Friday that potential new bidders have backed off.
It maintained its assertion that Yamana's offer is too low and risky, while Yamana argued the lack of other bidders proved its offer is fair.
''We offered the best value ... perhaps others came to the same conclusion,'' Marrone said.
At least two other gold companies with whom Meridian has been holding discussions have decided they don't intend to make any takeover proposals, Nevada-based Meridian said before markets opened Friday.
Meridian stock was down 7.9%, or C$2.67, to C$31.01 at mid-afternoon on the TSX - below Yamana's offer price. Meridian stock had ended Thursday at C$33.68, which was above Yamana's bid.
Yamana's shares also retreated on Friday. They fell 62 cents, or about 4.7%, to C$12.49. The three-way deal also includes the takeover of Northern Orion Resources Inc. [TSX:NNO; AMEX:NTO], which has approved the deal.
Northern Orion saw its stock rise a surprising 83 cents, or about 15%, to C$6.19, on a high volume of about 20 million shares.
Ed Dowling, Meridian's CEO, said in an interview Friday that serious players in the mining industry were interested in Meridian, but have decided not to put in bids.
''We've very carefully tried to downplay expectations ... we've always said the outcome for that was very uncertain,'' Dowling said.
''What we're certain about is the value of Meridian Gold, which is higher than the offer (by Yamana),'' Dowling said, adding the company continues to recommend to shareholders that they not tender their shares.
On Wednesday, a regulatory body ruled that Meridian Gold will lose the protection of its poison-pill plan on Sept. 11.
Poison pills are often used by boards to issue more shares in the event a hostile bidder gains too much of a stake in the company.
Yamana asked last week for the Ontario Securities Commission to intervene in the months-long takeover battle, arguing Meridian has had plenty of time to find an alternative bidder. But Yamana said it was expecting rival bids and that's why it needed to keep the pill in place for a few more days.
Yamana's cash-and-stock offer expires at 8 p.m. on Tuesday, Sept. 11, just 11 hours after Meridian's shareholder rights plan expires.
If the deal goes through, the new Yamana would move up in product and market cap among its peer group of mid-tier gold producers, while generating 69% of revenue from gold and 31% from other metals.
According to Yamana, the combined company would have an annual production of 1.5 million ounces by 2009 at a very low cash cost, from assets in Chile, Argentina and Brazil, placing it behind Kinross Gold Corp. [TSX:K; NYSE:KGC] and next to Iamgold Corp. [TSX:IMG; NYSE:IAG].
According to a June 29 research note by a Blackmont Capital analyst, the merged company would be a ''dominant mid-tier producer with excellent production growth, very low cash costs, strong cash flow generating capability, a strong balance sheet, and assets in safe political jurisdictions.''
The Meridian acquisition would follow previous acquisitions, including RNC Gold, Desert Sun Mining and Viceroy Exploration Ltd.
One challenge the new company would have to tackle is the future of the Esquel property, in Argentina, the development of which has been put on hold after Meridian was unsuccesful in obtaining local approvals.
After Meridian acquired the property in the Andes, the regional government banned heap leach gold mining, which uses a cyanide spraying process to extract gold from piles of ore.
The mine was later written off by Meridian in the 2005 fiscal year, for an amount of US $378.9 million.
Yamana has been critical of how Meridian handled the process, and Marrone said the negative outcome ''was the result of the deterioration of community relations'' and noted Yamana is developing its own gold assets in Argentina, such as the Gualcamayo gold project.
''Argentina is a great place for mining,'' Marrone said.
But Meridian's Dowling said Yamana doesn't know the details of the story behind Esquel.
''The situation was much more complicated than that. Anything foreign was extremely unpopular,'' Dowling said. ''We're working behind the scenes to release that value.''
(c) The Canadian Press 2007