Alio Gold Inc. agreed to acquire Rye Patch Gold Corp. in an all-share deal valuing the latter at about C$128 million, the companies said March 19.
Each common share of Rye Patch will be exchanged for 0.48 of an Alio Gold share, implying a value of C$1.57 per Rye Patch share and a 35% premium based on the 20-day volume-weighted average trading price of the two companies' shares.
The transaction is expected to close by May 25.
Following closing, existing Alio Gold and Rye Patch shareholders will own approximately 53% and 47% of the combined company, respectively.
The combined entity will have 165,000 ounces of gold production in 2018.
In connection the transaction, Macquarie Bank agreed not to exercise its right to require immediate repayment of the existing Florida Canyon project loan as a result of the change of control, subject to certain conditions.
At closing, the outstanding principal on project loan is expected to be C$15 million. Rye Patch Gold owns the Florida Canyon gold project in Nevada.
Alio Gold will continue to be managed by the executive team in Vancouver, British Columbia, led by Greg McCunn as CEO and Colette Rustad as CFO, with plans to appoint Doug Jones from Rye Patch as COO.
The resulting entity's board will comprise Bryan Coates as chairman and two directors from Rye Patch, Tim Baker and John Mansanti.
The parties will pay a C$4 million termination fee should the deal fall through.
Officers and directors of Rye Patch and certain shareholders including Primevest Capital Corp. have agreed to support the deal. The transaction was also unanimously approved by the board of Rye Patch.