Shares of precious metals miner SSR Mining (NASDAQ:SSRM) dropped out of the gate on May 11, eventually falling by over 10% by noon EDT. The big news was a so-called "merger of equals" with Alacer Gold Corp (OTC:ALIAF), but investors clearly weren't that excited about the proposed tie-up.
In a roughly $4 billion deal, SSR Mining and Alacer will merge into a new entity that will keep the SSR name. Alacer shareholders will receive 0.3246 shares of SSR for each share of Alacer they own. There is no premium being offered. Once the transaction is complete, former SSR shareholders will own around 57% of the combined entity with the rest belonging to former Alacer shareholders.
Following the merger, the chairman of SSR Mining's board, Michael Anglin, will remain in that position. The CEO post will go to the current CEO of Alacer, Rodney Antal. Both companies will provide five directors to the new 10-member board. There appears to be something of a shakeup in the leadership ranks taking place, with the smaller of the two entities, Alacer, effectively gaining day-to-day control.
The two companies highlighted a number of positives that are expected to come from the merger, including larger scale, geographic and commodity diversification, increased production, higher growth prospects, and strong free cash flow generation. However, investors clearly didn't find the combination as compelling as the two companies might have hoped, selling SSR shares off on the news. After rising slightly at the open, Alacer shares (traded on the pink sheets and in Toronto) fell as well, though not as much as SSR shares.
Even after the merger is complete, SSR Mining will be a relatively small precious metals miner. It also remains to be seen if pushing two smaller miners together creates a better, larger miner or just a larger miner. All in, there's a lot that still needs to get done before that can be answered. Investors looking at precious metals stocks to add some diversification to their portfolios should look beyond this deal, and stick with the larger, more established names, like Newmont Mining, or one of the streaming companies, such as Royal Gold.