Canadian gold miner Allied Gold Corp. AAUC-T has called off its $5.5-billion takeover deal with Zijin Gold International Co. ZIJMF after the deal failed to win approval from China’s foreign investment regulator within an acceptable time frame.
The transaction was originally supposed to close by May 29, but the target date was later pushed back to July 29, with Allied citing regulatory approvals and other closing conditions that had not been met.
Peter Marrone, the chief executive of Allied, told The Globe and Mail on Tuesday the revised deadline wasn’t going to be met, in part because China had not yet approved the transaction. Allied, he added, was also dealing with a host of other issues important to the close, including settling tax matters, as well as finalizing streaming, lending and security arrangements.
In a press release on Wednesday morning, Allied attributed the termination of the acquisition to “broader external factors applicable to cross-border transactions of this scale.”
Allied operates mines in Mali and Ivory Coast, producing about 375,000 ounces of gold a year, and is soon starting up a new mine in Ethiopia.
Shares in Allied fell by 18.6 per cent on the Toronto Stock Exchange on Wednesday to close at $24 apiece.
In an interview on Wednesday, Mr. Marrone said the failure to obtain approval from the regulator appears to be a big-picture policy decision in China, and not directly tied to his company.
He said he had made inquiries about how many mergers and acquisitions the regulator in China had approved in the past few months involving investment abroad by Chinese entities and Chinese nationals.
“The initial feedback that I have is that there’s been no approvals in that period of time,” he said. “That suggests to me that it’s a policy decision, not a decision particular to our company, or to this transaction.”
The National Development and Reform Commission in China, which regulates deals involving Chinese companies abroad, did not respond to a request for comment.
In May, the Financial Times, citing confidential sources, reported that the NDRC had raised concerns about the Allied deal, including both the premium being paid by Zijin and the geopolitical risks of operating in Mali.
China’s Zijin clears Canadian national security review around Allied Gold acquisition
But Mr. Marrone doesn’t buy that thesis.
“We have seen no evidence that is supportive of any of that,” he said.
In January, Zijin offered $44 a share in cash for Toronto-based Allied, which at the time represented an all-time high for the stock.
While Zijin will not acquire Allied, the Chinese miner plans to instead take a stake in the Canadian company. On Wednesday, Allied said that Zijin will acquire a 9.2-per-cent holding worth $417-million. Zijin will acquire approximately 12.8 million shares at $32.55 apiece, a 10.3-per-cent premium to Allied’s closing price on the TSX on Tuesday.
Zijin Gold trades on the Hong Kong Stock Exchange and is a subsidiary of Zijin Mining Group Co. Ltd., which is partly state-owned by China.
While there was some concern early on that Canada might not approve the acquisition, Ottawa promptly cleared it both on national-security and net-benefit grounds. Allied shareholders also decisively voted in favour of the deal in March.
China has major influence over another big takeover involving a Canadian mining company.
One of the final impediments to Anglo American PLC’s planned acquisition of Vancouver-based Teck Resources Ltd. is obtaining regulatory approval in China. However, unlike the Zijin transaction with Allied, no Chinese mining companies are directly involved. Instead, authorities are scrutinizing the impact the Anglo Teck combination would have on China’s copper supply. The State Administration for Market Regulation is determining whether too much power might be concentrated in one entity, and how that might affect China as a major buyer of the commodity.
Both Teck and Anglo last week said the deal remains on track to close between September, 2026, and March of next year. Teck CEO Jonathan Price said in a conference call last Thursday that SAMR’s probe of the transaction is progressing normally, the company is responding to various requests as part of that process and Teck hasn’t received “any requests for remedies arising from the approval process.”