Pan American Silver (PAAS) shares are experiencing a significant pre-market plunge of 7.39% on Monday following the announcement of its agreement to acquire MAG Silver (MAG) for approximately $2.1 billion in a cash and stock deal. This major move in the precious metals sector has sparked immediate investor reaction, leading to a sharp decline in Pan American's stock price.

According to the terms disclosed late Sunday, MAG Silver shareholders will receive $20.54 per share, comprising $500 million in cash and 0.755 Pan American shares for each MAG share. Upon completion of the acquisition, MAG shareholders are set to own approximately 14% of Pan American shares. The merger will be executed through a court-approved plan of arrangement and requires a two-thirds approval from MAG shareholders at a special meeting expected to take place in July.

The pre-market stock plunge suggests that investors may have concerns about the acquisition's impact on Pan American Silver's financial position and future performance. The substantial size of the deal, which includes a significant cash component, could be putting pressure on the company's balance sheet. Additionally, the stock portion of the deal may be viewed as potentially dilutive to existing Pan American shareholders. Market participants appear to be reassessing the company's valuation in light of this major strategic move, which is expected to close in the second half of the year, subject to regulatory approvals including clearance under Mexican antitrust laws.