Pan American Silver Corp. (TSX:PAA, NASDAQ:PAAS) shares slumped more than 16% after it announced it will be acquiring MAG Silver Corp (TSX:MAG) in a deal valued of US$2.1 billion.
Per the terms of the deal, MAG shareholders can choose to receive US$20.54 per share in cash, 0.755 common shares of Pan American per MAG share, or a mix of both, with the total cash portion capped at US$500 million.
MAG holds a 44% joint venture interest in the high-grade, large-scale Juanicipio silver and gold mine in Mexico, operated by Fresnillo, which owns the remaining 56%.
Pan American CEO Michael Steinmann said the acquisition allows the company to enter what he described as one of the best silver mines in the world.
“Juanicipio is a large-scale, high-grade, low-cost silver mine that will meaningfully increase Pan American’s exposure to high-margin silver ounces,” Steinmann said.
“Furthermore, we see future growth opportunities through the significant exploration potential at Juanicipio as well as MAG’s Deer Trail and Larder properties.”
The deal is expected to close later this year. Following the acquisition, MAG shareholders will own about 14% of Pan American on a fully diluted basis.
Shares of Pan American Silver fell 16.2% to about $23 on the announcement, while MAG Silver stock added 6.2% at about $18.