AUY - Why Gold Fields Stock Sank Today and Yamana Gold Rose
Shares of precious metals miner Gold Fields (NYSE: GFI) fell as much as 23% at the open of trading on May 31. Meanwhile, Yamana Gold (NYSE: AUY) rose around 12%. Although both have pared their respective losses and gained a little, the moves are tied at the hip. That's because Gold Fields is buying peer Yamana, with the exact outcomes on their stock prices that you would expect.
The basics of the acquisition are that Gold Fields will buy Yamana in an all-stock deal. Yamana shareholders will receive 0.6 shares of Gold Fields for every Yamana share they own. At the time of the announcement, the implied value of Yamana was roughly $6.7 billion. Gold Fields shareholders will own roughly 61% of the combined entity with Yamana shareholders owning 39%. Given that the deal will result in Gold Fields issuing new shares, which will effectively dilute current Gold Fields shareholders, its stock fell. That's normal for an acquirer. And since Gold Fields agreed to pay a premium for Yamana's shares, its stock rose. Again normal.
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Why Gold Fields Stock Sank Today and Yamana Gold Rose