Sierra agrees to Alpayana’s second sweetened takeover bid

Canada’s Sierra Metals (TSX: SMT) agreed in principle to be taken over by Alpayana after the Peruvian miner sweetened its offer for a second time, tentatively putting an end to a four-month saga.

Alpayana will make an offer to buy all of Sierra’s common shares for C$1.15 apiece in cash, the Toronto-based company said Wednesday in a statement. That’s 3.6% more than the C$1.11 hostile bid that Sierra rejected earlier this month.

To give Sierra shareholders enough time to tender their shares, Alpayana has extended its existing takeover bid until 5 p.m. Toronto time on May 12.

Sierra shares soared 19% to C$1.08 in Toronto Wednesday morning, still shy of the revised offer price. That gave the company a market value of about C$230 million.

Family-owned Alpayana has been operating mines in Peru for over 38 years. The company, which has no debt and more than $500 million in annual revenue, said this month it was “uniquely positioned” to cut costs at Sierra and “eliminate” its debt, which stood at C$96.3 million as of Dec. 31, up from C$78.5 million a year earlier. Alpayana’s controlling shareholders are minority investors in Minera Corona, Sierra’s Peruvian unit.

Sierra’s board of directors unanimously supports the revised takeover bid, as does the special committee of independent directors, the company said Wednesday. Sierra also said its board will unanimously recommend that shareholders tender their shares to the bid.

Rising profits

BMO Capital Markets, which is advising Sierra, called the new amount that Alpayana is prepared to pay “fair” from a financial point of view.

Sierra operates two copper mines, Peru’s Yauricocha and Bolivar in Mexico. Earlier this year it forecast 2025 earnings before interest, tax, amortization and depreciation of $130 million compared with $74 million in 2024.

Costs have been cut by increasing mill capacity at Bolivar and Yauricocha, while higher copper and gold prices have lifted margins. In December, the company refused a first buyout offer of C$0.85 a share from Alpayana.

“Sierra has high levels of expensive debt, a large working capital shortfall, an unpaid C$56.1 million obligation to its publicly traded Minera Corona unit, and high corporate expenses, along with being one of the highest cost-per-pound copper producers in the industry,” Alpayana said April 2 after raising its bid a first time.

“Given Sierra’s thin margins, it is vulnerable to withstanding any potential unexpected production, labor, social, political, regulatory and/or macro challenges.”