Franco-Nevada has a fight on its hands, as takeover target International Royalty Co. finds a white knight on Friday in rival Royal Gold.
The latest update in this battle among mining financiers saw Royal Gold strike a friendly cash-and-shares offer valued at $749-million, topping an all-cash $6.75-a-share bid from Franco-Nevada two weeks ago that put International Royalty in play.
Franco-Nevada is currently the dominant player in this corner of the mining world, and that status is in danger if Royal Gold wins the day with a bid it valued at $7.45 a share. Royal Gold will offer up to $350-million (U.S.) in cash and the rest of the purchase price in stock. While the exact formula will only be determined if International Royalty shareholders tender, the offer is basically half cash and half paper.
While Royal Gold now has the upper hand, cash-rich Franco-Nevada has the firepower needed to top this offer, if a better bid makes business sense. It's been a long time since we've seen a multi-player bidding war, and the fact that all sorts of rivals are willing to make large bets on International Royalty's portfolio of stakes in mining projects speaks to a sense of confidence in the prospects for resource companies.
In winning approval from International Royalty's board, Royal Gold was able to gain a number of advantages that kick in, if this takeover battle continues. International Royalty cannot solicit other bids, and has given Royal Gold the right to match any other offers. Should Royal Gold be trumped, the company stands to bank a $32-million break fee, though that payment from International Royalty drops to $5-million under certain unspecified circumstances.
Goldman Sachs Group and HSBC are advising Royal Gold, along with law firms Hogan & Hartson and McCarthy Tétrault.
Scotia Capital and law firms Fasken Martineau DuMoulin and Perkins Coie are working with International Royalty. Franco-Nevada has BMO Nesbitt Burns and Goodmans in its corner.
Andrew Willis