HALIFAX, N.S. - Apollo Gold Corp. plans to acquire Linear Gold Corp. in a share-swap merger that values Linear at more than $100 million, the companies announced Tuesday.
Subject to shareholder approval, Apollo (TSX:APG) will acquire all outstanding Linear (TSX:LRR) shares on the basis of 5.474 Apollo shares for each Linear share.
That represents a 20 per cent premium based on a 20-day volume weighted average price of both companies as of March 8, or the equivalent of $2.30 for each of Linear's 44.2 million shares outstanding.
In midday trading on the Toronto Stock Exchange, Linear stock was down eight cents or four per cent at $1.92 on volume of more than 600,000 shares. Apollo shares were off 35 cents or more than eight per cent at 38.5 cents on volume of 2.3 million shares.
The merger will leave current Apollo shareholders with 52.2 per cent or the combined company and Linear shareholders 47.8 per cent.
In addition, Linear will subsequently purchase by way of a private placement, 62.5 million Apollo common shares at a price of 40 cents per share for gross proceeds of $25 million.
Apollo, which plans to change its name after the merger, will use the proceeds to repay US$10 million of indebtedness under its Black Fox project facility and the rest for working capital.
Post merger, the Apollo board will be comprised of four existing Apollo directors; two Linear directors, including the position of chairman of the board, and one new director to be mutually agreed upon.
"This is an exciting time for the shareholders of both Apollo and Linear as we take a very important step towards building one of Canada's premier mid-tier gold producers," Apollo president and CEO David Russell said in a news release.
"The successful completion of this Merger will position the combined company to deliver both near and long-term value to its shareholders through existing production growth as well as significant development and exploration upside across a diverse portfolio of precious metal properties."
Linear president and CEO Wade Dawe said the merger would allow the company to "rapidly transition from a development and exploration company to an established gold producer while continuing to participate in the exploration and development upside of the combined assets of the merged company."
The assets of the combined company will include 2010 estimated production at Apollo's Black Fox mine in Timmins, Ont., of approximately 100,000 ounces of gold and expected medium-term production growth by 2013 of approximately 70,000 additional ounces of gold per year from Linear's Goldfields project in northern Saskatchewan.