Yesterday, Primero Mining (P.TO; NYSE:PPP) announced it would acquire Brigus Gold (BRD.TO; NYSEMKT:BRD) in an all-share deal, whereby Brigus shareholders would receive 0.175 Primero shares per share of Brigus Gold they own. Based on the current share price of Primero of C$4.87, this results in a value of C$0.85 per share of Brigus Gold. On top of that, the shareholders of Brigus will receive 90.1% of a spin-off which will hold the Saskatchewan and Mexican assets, as well as C$10M in cash.
From the perspective of Brigus Gold, this is an excellent deal as the company won’t be a one-trick pony any longer, and the Primero Mining team will bring a lot of experience in underground mining which might enhance the operational efficiency of the Black Fox Mine.
We think the offer is very fair, and Brigus shareholders should accept it. However, we don’t see much value in the SpinCo and would recommend to sell the spinoff as soon as it starts trading.