UPDATE 2-Gammon Gold adopts takeover defense, stock soars

* Says defense not in response to specific approach

* Comes amid increased M&A activity in sector

* Stock up 5.36 percent

(Adds share price reaction in third paragraph)

TORONTO, Aug. 19 (BestGrowthStock) – Gammon Gold Inc (GAM.TO: ), a
mid-tier gold producer with mines in Mexico, said on Thursday
its board approved a poison pill defense against takeovers as
merger and acquisition activity builds in the sector.

Toronto-based Gammon Gold said the shareholder rights plan,
as it is officially known, was not adopted to protect against a
known advance by a potential bidder.

Stock in Gammon Gold rose 5.36 percent in Toronto in trade
to C$7.27 per share.

“The Plan is designed to ensure that Gammon’s shareholders
are treated fairly in the event of a take-over bid for Gammon’s
common shares and that Gammon’s Board of Directors and
shareholders will have adequate time to evaluate any
unsolicited take-over bid and, if appropriate, evaluate and
pursue other alternatives to maximize shareholder value,”
Gammon said in a statement.

Speculation has increased about deals in the mid-tier gold
sector after Kinross Gold Corp (K.TO: ) made a $7.1 billion,
all-stock offer for Red Back Mining (RBI.TO: ) on Aug. 2.

The poison pill lets Gammon issue shares at a discount to
all other shareholders if a single shareholder acquires a stake
higher than 20 percent. That leads to a massive dilution of the
stock that makes a firm nearly impossible to acquire.

“The plan was not adopted in response to any actual or
threatened take-over bid or other proposal from a third party
to acquire control of Gammon and is not intended to block
take-over bids,” Gammon said.

The plan has been conditionally accepted for filing by the
Toronto Stock Exchange subject to shareholder approval within
six months.

Gammon Gold said last week its second-quarter operating
profit rose on increased production and a higher gold price.
($1=$1.03 Canadian)
(Reporting by Pav Jordan; editing by Janet Guttsman)

UPDATE 2-Gammon Gold adopts takeover defense, stock soars