Eldorado Gold to purchase European Goldfields for $2.5B

By Nadia Damouni

NEW YORK • European Goldfields Ltd. said on Sunday that it had agreed to be bought by Eldorado Gold Corp. for about $2.5-billion.

The deal represents a 48.4% premium based on both companies’ closing share prices on the Toronto Stock Exchange as of Dec. 5, the last trading day before European Goldfields said it had received preliminary approaches from third parties.

European Goldfields shareholders will be offered 0.85 Eldorado share and $0.0001 in cash for each European Goldfields share they own. The exchange ratio represents a value of $13.08 per share based on the closing stock price of Vancouver-based Eldorado on the TSX on Friday of $15.39.

Whitehorse-based European Goldfields has long been seen as a potential target for rivals, particularly after it received a much-delayed Greek mining permit that could turn it into a mid-tier miner and one of Europe’s largest primary gold producers.

Following the completion of the deal, current Eldorado shareholders will own about 78% of the combined company, while shareholders of European Goldfields will hold around 22 percent, on a fully diluted basis.

“Integration of European Goldfields’ business in the Aegean Region and the combined business will constitute the leading low cost, high growth intermediate gold producer globally,” Eldorado Chief Executive Officer Paul Wright said in a statement.

The combined company will have gold production of 650,000 ounces, which will rise to more than 1.5 million ounces by 2015 as projects come into production, Eldorado said.

The proposal, recommended by the boards of both companies, requires approval of two thirds of European Goldfields shareholders at a meeting planned for mid-February.

European Goldfields was advised by BMO Capital Markets and Lazard & Co, and its legal adviser was Stikeman Elliott LLP. Eldorado’s financial advisers included GMP Securities LP and BoA Merrill Lynch. Its legal counsel was Borden Ladner Gervais LLP.

© Thomson Reuters 2011