Tahoe Resources will pay C$1.4 billion ($1.12 billion) in cash and stock to acquire Rio Alto Mining.
The deal is expected to close in April 2015. Tahoe shareholders will own 65% of the combined company after the deal closes, with Rio Alto shareholders owning the remaining 35% of the company.
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"The combination of Tahoe and Rio Alto is designed to create a stronger and better positioned company going forward," Tahoe Vice Chair and CEO Kevin McArthur said in a statement. "In addition to diversifying our asset base into one of the most attractive precious metal producing regions in the world, this transaction establishes a strong platform for future growth."
Shares of Tahoe Resources were falling 10.6% to $12.62 following the announcement.
TheStreet Ratings team rates RIO ALTO MINING LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate RIO ALTO MINING LTD (RIOM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, RIOM's share price has jumped by 37.86%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 33.6% when compared to the same quarter one year prior, rising from $15.91 million to $21.25 million.
- RIOM's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
- Net operating cash flow has decreased to $30.92 million or 12.86% when compared to the same quarter last year. Despite a decrease in cash flow RIO ALTO MINING LTD is still fairing well by exceeding its industry average cash flow growth rate of -38.98%.
- RIO ALTO MINING LTD's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, RIO ALTO MINING LTD reported lower earnings of $0.17 versus $0.56 in the prior year.
- You can view the full analysis from the report here: RIOM Ratings Report