Alio Gold (AL) and Rye Patch Gold (RPMGF) are pleased to announce they have entered into an agreement whereby Alio Gold will acquire, through a plan of arrangement all of the outstanding shares of Rye Patch. Under the Arrangement, each common share of Rye Patch will be exchanged for 0.48 common shares of Alio Gold.The offer implies a value of C$1.57 per Rye Patch share, a 35% premium to Rye Patch shareholders, based on the 20-day volume weighted average trading price of Alio Gold shares on the TSX and Rye Patch shares on the TSX.V for the period ending March 16, 2018. The offer values Rye Patch's outstanding equity at approximately C$128 million. The number of Alio Gold shares to be issued will be approximately 39.0 million based on the issued and outstanding shares as of the announcement date, subject to adjustment for options, warrants and restricted stock units vested prior to the Arrangement. The transaction is expected to close on or about May 25, 2018. Existing Alio Gold and Rye Patch shareholders will own approximately 53% and 47% of the combined company, respectively, following the close of the transaction. In conjunction with the proposed transaction, Macquarie Bank Limited has agreed not to exercise its right to require immediate repayment of the existing Florida Canyon project loan as a result of this change of control, subject to certain conditions. At the closing of the transaction, the outstanding principal owing on the MBL project loan is expected to be $15M. MBL and the Company have commenced discussions regarding a restructuring of the loan at or after closing of the transaction and MBL has provided indicative terms for such a restructuring which remain subject to credit approval. The indicative terms for the restructuring envision the principal remaining at the closing of the transaction will be repaid over 12 equal quarterly payments along with accrued interest. Project loan type covenants including forward-looking financial ratios, cash sweep for early repayment of the loan and debt service and capital reserve account requirements would be replaced with a corporate guarantee and security from Alio Gold and certain of its affiliates. The Company intends to continue to work with MBL to seek final credit approval ahead of the close of the transaction. Alio Gold will continue to be managed by the executive team in Vancouver, Canada led by Greg McCunn as Chief Executive Officer and Colette Rustad as Chief Financial Officer. In addition, the Company will seek to retain Doug Jones from Rye Patch as its Chief Operating Officer. Alio Gold's Board of Directors will continue to be led by Chairman, Bryan Coates and Alio Gold have invited two directors from Rye Patch, Tim Baker and John Mansanti, to join the combined board. Committees are expected to be reconstituted at the first board of directors' meeting following the close of the transaction. In the event that the transaction is not completed, a termination fee of C$4M is payable to either Alio Gold or Rye Patch, respectively, upon termination of this transaction by the terminating party on terms customary for a transaction of this nature. Rye Patch has also provided Alio Gold with certain other customary rights, including a right to match competing offers. Full details of the Arrangement will be included in the management information circulars of Alio Gold and Rye Patch and both circulars are expected to be mailed to their respective shareholders on or about April 17, 2018. It is anticipated that both shareholder meetings and closing of the transaction will take place on or about May 25, 2018.
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Royal Dutch Shell (RDS.A) downgraded to Hold from Buy at HSBC with analyst Gordon Gray citing valuation with the shares outperforming peers by 11% year-to-date. 2. Hibbett Sports (HIBB) downgraded to Underperform from Neutral at Buckingham with analyst Eric Tracy citing the company's better than feared earnings report and the stock's subsequent squeeze. 3. Alio (ALO) downgraded to Underperform from Outperform at Raymond James with analyst Tara Hassan citing reduced expectations for San Francisco production estimates and negative headlines in Guerrero that could weigh on shares near-term. 4. Southwestern Energy (SWN) downgraded to Neutral from Buy at Mizuho. 5. Teradyne (TER) downgraded to Hold from Buy at Deutsche Bank with analyst Sidney Ho citing valuation. This list is just a portion of The Fly's analyst coverage. To see The Fly's full Street Research coverage, click here.
Alio downgraded to Underperform from Outperform at Raymond James. Raymond James analyst Tara Hassan downgraded Alio to Underperform from Outperform to reflect reduced expectations for San Francisco production estimates and negative headlines in Guerrero that could weigh on shares near-term.