Laurion Mineral Exploration Inc. V.LME

Kirkland Gold Information Circular

[ahsineeg]

At 6:30AM Eastern Time on Sept 28, 2021 Kirkland Gold announced it was merging with Agnico Eagle Mines in an $11 billion deal.  Let's take a look at what happened behind the scenes with that deal.

Press Release: https://www.newswire.ca/news-releases/agnico-eagle-and-kirkland-lake-gold-announce-merger-of-equals-to-create-highest-quality-senior-gold-producer-804004928.html

Information Circular: Link to Circular

The details of the play by play timeline start on the page numberd -66- "Background of the Arrangement"

First contact between the companies dates June 4, 2019....however discussions did not get serious enough to form a Special Committee and have them retain a financial advisor until much later.  Which tells me that forming a Special Committee means there is already a pretty good proposal that both companies like and want to further explore to ensure it's in the best interest of all shareholders.

On June 4, 2019, Tony Makuch, President and Chief Executive Officer of Kirkland, and Sean Boyd, Chief Executive Officer of Agnico, met informally to discuss the possibility of a potential “merger of equals” between Kirkland and Agnico. On June 24, 2019, Kirkland and Agnico entered into a mutual confidentiality and standstill agreement with a two-year term, to enable the provision of non-public information and facilitate further discussions.

Throughout the remainder of 2019 and the beginning of 2020, Mr. Makuch and Mr. Boyd had numerous discussions concerning a potential transaction that escalated to a more advanced stage in the summer of 2020.

On June 22, 2021, Kirkland and Agnico agreed to extend the term of the original mutual confidentiality and standstill agreement dated June 24, 2019 by an additional year until June 24, 2022. Following the extension of the Confidentiality Agreement, Kirkland and Agnico resumed reciprocal legal, financial and technical due diligence. During the remainder of the summer of 2021, the Parties continued to engage in discussions and to continue ongoing due diligence reviews.

On June 27, 2021, the Kirkland Board met with Kirkland’s senior management and, at the request of the Kirkland Board, received a presentation from BMO Capital Markets regarding a potential transaction with Agnico. Cassels was consulted to discuss the circumstances in which a special committee of the Kirkland Board would be required or advisable and the fiduciary duties of directors in the context of potential change of control or merger transactions. After discussions and having considered the advice of Cassels, on July 5, 2021 the Kirkland Board ratified the formation of the Kirkland Special Committee comprised of Peter Grosskopf, Jon Gill and Jeffrey Parr (each an independent director), with Mr. Grosskopf serving as Chairperson, to assist in evaluating and negotiating a proposed transaction. The Kirkland Board also approved a broad mandate for the Kirkland Special Committee that included responsibility for, among other things, reviewing and considering any proposal relating to a proposed transaction with Agnico, supervising and managing a process for evaluating the proposed transaction and making recommendations to the Kirkland Board in respect of the proposed transaction. In carrying out its responsibilities, the Kirkland Special Committee was authorized to, among other things, retain financial, legal and other advisors if required or considered to be appropriate in the circumstances.

On August 15, 2021, the Kirkland Special Committee engaged CIBC Capital Markets as its financial advisor (with a formal engagement letter signed on August 30, 2021).

Between September 24 and September 26, 2021, Mr. Makuch and Mr. Boyd discussed the exchange ratio in the context of current trading activity and, at the direction of the Special Committee, Mr. Makuch proposed an increased exchange ratio whereby Kirkland Shareholders would own 46% of the combined company on completion of the proposed transaction.

On the morning of September 27, 2021, Mr. Makuch and Mr. Boyd had a telephone call to discuss the status of negotiations and the increased exchange ratio. Following the close of markets on September 27, 2021, Mr. Boyd confirmed Agnico’s agreement to an increased exchange ratio such that Kirkland Shareholders would own 46% of the combined company on completion of the proposed transaction, implying an exchange ratio 0.7935 of an Agnico Share for each Kirkland Share.

Early in the evening of September 27, 2021, the Kirkland Special Committee met with the full Kirkland Board and Kirkland’s senior management, together with representatives of Cassels, Fasken, BMO Capital Markets, Maxit Capital and CIBC Capital Markets, to review and consider the terms of the Merger Agreement. Representatives of Kirkland’s senior management, Cassels and Fasken reported on the most recent revisions that had been made to the draft Merger Agreement and the ancillary agreements and the Kirkland Special Committee was provided with the opportunity to ask questions of Kirkland’s senior management and of the legal and financial advisors. The Kirkland Special Committee received a presentation from CIBC Capital Markets regarding, among other things, an analysis of the relative values of the Parties and an overview of the potential synergies. Following the presentation, the remainder of the Kirkland Board, Kirkland’s senior management and representatives of Cassels, BMO Capital Markets and Maxit Capital were excused from the meeting and the Kirkland Special Committee authorized representatives of Kirkland’s senior management to continue to negotiate with Agnico with a view to finalizing the terms of the Arrangement and the Merger Agreement and resolved to reconvene following the resolution of certain final outstanding points.

Later in the evening of September 27, 2021, the Kirkland Special Committee met with the full Kirkland Board and Kirkland’s senior management, together with representatives of Cassels, Fasken, BMO Capital Markets, Maxit Capital and CIBC Capital Markets, to discuss the final outstanding points in the Merger Agreement. Cassels and Fasken reported on the most recent revisions that had been made to the draft Merger Agreement, following which CIBC Capital Markets provided its oral fairness opinion, which was subsequently confirmed by delivery of a written opinion, that, as of September 27, 2021, and subject to the assumptions, limitations, and qualifications set out therein, the Exchange Ratio is fair, from a financial point of view, to the Kirkland Shareholders. After discussion and consideration, including a review of the transaction terms, the CIBC Capital Markets Fairness Opinion and other relevant matters, the Kirkland Special Committee unanimously determined that the Arrangement and the entering into of the Merger Agreement are in the best interests of Kirkland and that the Consideration is fair to the Kirkland Shareholders and recommended to the Kirkland Board that the Kirkland Board approve the Arrangement and the entering into of the Merger Agreement and ancillary agreements, and recommend that Kirkland Shareholders vote in favour of the Arrangement.

Following the meeting of the Kirkland Special Committee, the Kirkland Board met to receive the report of the Kirkland Special Committee and to receive advice from its financial and legal advisors. Cassels reviewed the terms of the Merger Agreement and ancillary agreements to be entered into in connection with the Arrangement, and the Kirkland Board was provided with the opportunity to ask questions of Kirkland’s senior management and of its legal and financial advisors. The Kirkland Board received oral fairness opinions from BMO Capital Markets and Maxit Capital, which were subsequently confirmed by delivery of written opinions, that, as of September 27, 2021, and subject to the assumptions, limitations, and qualifications set out therein, the Exchange Ratio is fair, from a financial point of view, to the Kirkland Shareholders. After a discussion and taking into consideration the unanimous recommendation of the Kirkland Special Committee, its own assessment of the transaction and the interests of Kirkland Shareholders, the BMO Fairness Opinion and the Maxit Capital Fairness Opinion and other relevant matters, the Kirkland Board unanimously determined that the Arrangement and the entering into of the Merger Agreement are in the best interests of Kirkland and that the Consideration is fair to the Kirkland Shareholders, unanimously approved Kirkland entering into the Merger Agreement and the ancillary agreements and unanimously resolved to recommend that Kirkland Shareholders vote in favour of the Arrangement.

Throughout the evening of September 27, 2021 and the morning of September 28, 2021, Kirkland and Agnico, assisted by their respective legal and financial advisors, finalized the terms of the Merger Agreement and other transaction documents. Kirkland and Agnico executed the Merger Agreement early in the morning on September 28, 2021 and jointly announced the Arrangement prior to markets opening on September 28, 2021.

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Another example of a deal getting done, and the steps / process required to ensure the deal is fair to all shareholders.  

The fact that LME board has formed a special committee and the special committee has retained a financial advisor tells me good things are happening behind the scenes.

[GinoSky]

Thanks Ahsineeg for the deep dive and finding these information circulars with the background on timelines of these successful deals.  From the 15 August date of engaging their Financial Advisor to the 28 September market announcement of a merger, we're looking at a 6 week time period.  Given that it's now been 3 weeks since the PR announcing USCG's involvement with LME, I

[ahsineeg]

I believe the LME AGM has not been announced yet because they'd like to have it be the meeting where a buy out offer (plan of arrangement) is voted on by shareholders.  Historically LME announces the AGM 60 days before the actual meeting date.  That means any BO announcement before end of October gives enough time to announce / conduct meeting and have the deal close before end of

[GinoSky]

With that 60 day lead time, I'll be cautiously optimistic that we hear something in the next 4 weeks for a buyout announcement. The share price would have to go fully parabolic in the next 2 weeks in order to have those warrants back in the money by Sept 27th.  As much as I'd love to see that, I think the odds are pretty low.  I'd be satisfied getting back into the 60 cent

[ahsineeg]

Once a deal is announced, the share price will immediately go up to near the proposed price and then trade in that range until the deal is voted on and closes. If someone opted to sell their shares (at the new higher price) before the deal closes, they would miss out on the potential that another company comes in and bids higher! I'm sure someone else can describe the various possible

[Neil68]

I once owned warrants in another company and the expiration date was extended two times, each time 1 year out. Hopefullly a warrant extension will not be required in LME's case, but it is possible.