RE:BNS Take from KL PerspectiveFor thoses who like the deal (me included) read the entire thing for lots of hope :-))
OUR TAKE: Mixed. AEM and KL have announced a merger of equals, with the combined company to produce 3.4Moz Au in 2021E from 12 mines in four countries and growing to 3.6Moz Au in 2023E. Combined market cap would be US$24B, effectively creating a third major gold producer. It would have 48 Moz of gold Reserves, 40 Moz in Resources, and 32 Moz in Inferred. The combined entity would also have a strong balance sheet with US$1.1B in cash and US$1.2B in undrawn revolving credit (US$2.3B total liquidity). AEM/KL is targeting synergies of $2B over 10 years (or five-year synergies of $800M). Tony Makuch would be CEO, Sean Boyd Executive Chair of the Board, and Ammar Al-Joundi President. Ownership would be 54% AEM existing shareholders and 46% KL shareholders. Overall, we expect the market reaction to be mixed for KL shares.Deal synergies are compelling through the combination of two sector leaders operating in stable political jurisdictions with a low costs and strong FCF profiles. The relative share exchange ratio results in ~9% lower consideration for KL shareholders based on yesterday's close. For this reason, we think interloper odds are higher than usual. We rate KL shares SO with a C$61 PT.