June 24, 2011 / 3:25 PM / 8 years ago

UPDATE 2-Golden Minerals to buy ECU Silver for C$302.5 mln

* Reverse merger values ECU at C$0.97/shr

* Deal at a discount of 7 pct to ECU’s Thursday close

* Deal backed by Golden’s largest shareholder, all executives

* New company to be led by Golden Minerals’ CEO

* ECU shares down 7 pct, Golden’s shares mostly unchanged (Adds details from press release, conference call)

June 24 (Reuters) - Golden Minerals Co will buy Canada’s ECU Silver Mining in a reverse merger for about C$302.5 million ($309.1 million) in cash and stock, to form a new silver mining company focused mainly in Mexico and Argentina.

Colorado-based Golden Minerals has assets in Mexico and South America and its key project is the El Quevar project in Argentina. ECU Silver owns the Velardeña properties in Durango, Mexico.

Under the terms of the deal, ECU shareholders will get 0.05 common shares of Golden Minerals and about C$0.000385726 in cash for each share they hold, giving them ownership of more than 50 percent of the new entity.

The deal values ECU at C$0.97 a share — a discount of about 7 percent to their closing price of C$1.04 on Thursday on the Toronto Stock Exchange.

Sentient Group, Golden Minerals’ largest shareholder with a 19 percent stake, backed the proposed deal and expects to invest in the new company to retain its current proportionate ownership, although no agreement has been reached as yet.

Both companies agreed to not solicit alternative proposals, but granted the other party a right to match any competing proposal. The break-up fee was set at C$10 million for both.

The directors and officers of both companies also agreed to vote in favor of the deal, which is expected to close between late August and early September. The new entity will be led by Golden Minerals’ Chief Executive Jeffrey Clevenger.

ECU Silver said it will issue about C$15 million in convertible notes to Golden Minerals, with a conversion price of C$0.97 per share and a maturity date of June 30, 2012.

Golden Minerals hired BMO Capital Markets as its financial adviser, while ECU’s financial adviser was Dahlman Rose & Co.

ECU shares of were down 7 percent at 97 Canadian cents in mid-day trade on Friday on the Toronto Stock Exchange. Shares of Golden Minerals were down less than a percent at $20.13 on the American Stock Exchange. ($1 = 0.979 Canadian Dollars) (Reporting by Gowri Jayakumar in Bangalore; Editing by Savio D’Souza)

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