Gammon Returns for CapGold

Canada-based miner Gammon Gold has made a new offer to acquire US-based Capital Gold. Both companies operate in Mexico. The deal is valued at $288m or $4.57 per CapGold share. Each common share of CapGold would be exchanged for 0.5209 common shares of Gammon Gold and a cash payment of $0.79 per share. The acquisition has the unanimous support of both companies’ boards, each company says. However, it looks like the offer may run into trouble. US-based law firm Brodsky & Smith has announced it is investigating potential claims against CapGold’s board as it believes the transaction to be unfair given that CapGold’s stock traded at $4.83 September 30, meaning that the current Gammon offer undervalues the company. Also, the offer comes soon after Canada-based miner Timmins Gold, which also operates in Mexico, offered to buy CapGold for $275m. The offer was rejected by CapGold’s board. Gammon’s financial advisors are Dundee Securities and UBS, while CapGold’s is Comark Securities. A previous offer Gammon made for CapGold fell through after Gammon’s share price slid following the deal. The offer, made in March 2009, was valued at $150.5m based on Gammon’s offer of $0.76 per CapGold share. As part of the deal each CapGold share would be exchanged for 0.1028 Gammon shares. On that deal BMO was advising Gammon and Jennings Capital was advising CapGold. On October 1, Gammon’s shares closed at $6.88, down 1.9% while CapGold’s closed at $4.82, down 0.2%.