KazakhGold Group Ltd. to buy OAO Polyus Gold in a $9.4 billion deal


In an effort to gain acquisition investment capability, KazakhGolg Group Ltd, the Jersey registered company, announced that it’s in a deal that will see it acquire its parent company, OAO Polyus Gold at an estimated investment of $9.4 billion. The result will be the creation of the biggest producer of Gold amongst former Soviet republics and enabling it to seek acquisition investments.


It is hoped that under one listing in the London Stock Exchange, the combined unit will offer an attractive acquisition currency for future expansion and consolidation within the gold sector, the company said Thursday in a statement. On the other hand, the takeover will enable Russia’s biggest gold producer, Polyus, bypass the local law capping at 25% company shares for companies that can be held as depository receipts, subsequently allowing it access to more investors on global markets as it seeks expansion.


Polyus Chief executive officer, Evgeny Ivanov, said the transaction was a must as a preliminary move for any other international investment acquisitions, adding that the Russian firm will take part in any other acquisitions that it deems viable and beneficial to its business.


In the agreement deal for the investment, KazakhGold agreed with the two main shareholders of Polyus, billionaires Mikhail Prokhorov and Suleiman Kerimov, for the acquisition of a 74.3% of the company’s stock in exchange for its own shares, read the statement; in addition to an agreement that was signed between KazakhGold and Polyus subsidiary, Jennington International Inc. The investment deal terms will see KazakhGold’s 9.260 global depository receipts exchanged for every Polyus share and 4.885 KazakhGold GDRs for every Polyus American depository share.


The ratios reflect a Polyus share value of about $48.25, every two Polyus ADSs at about $50.90 and each KazakhGold GDR at about $5.21, according to the statement. That values Polyus’s issued share capital at about $9.4 billion. KazakhGold said it would also start a $100 million equity capital raising of new shares and GDRs, delayed from last year.


The shares and GDRs will be offered at $1.50 each and the proceeds used to repay a $50 million shareholder loan from Jenington. KazakhGold and Polyus would together form the largest gold producer listed in London. They produced a total of 1.3 million ounces last year, almost double the current largest producer, African Barrick Gold Plc, which mined 716,000 attributable ounces of gold.


1 July 2010.