Saturday, November 22, 2014

Goldcorp raises cash and stock bid for Osisko Mining to $3.6 billion

VANCOUVER — Goldcorp Inc. (TSX:G) increased its hostile takeover offer for Osisko Mining Corp. (TSX:OSK) to $3.6 billion in stock and cash on Wednesday in an attempt to topple a rival deal reached last week by Osisko.
Goldcorp’s new bid for Osisko and its flagship Canadian Malartic gold mine in Quebec is up against a friendly offer involving Yamana Gold (TSX:YRI) and two of Canada’s largest pension funds that valued Montreal-based Osisko at about $3.4 billion.

“The recent completion of our due diligence process has confirmed the technical and financial merits of our decision to acquire Osisko,” Goldcorp chief executive Chuck Jeannes said in a statement Thursday.
“Goldcorp’s increased offer represents straightforward and superior value for Osisko shareholders, while ensuring accretion on key per-share metrics for Goldcorp shareholders.”
Trading of Osisko shares was extremely heavy after the announcement with roughly 27 million swapping hands by midday as they gained two cents to go for $7.57. Goldcorp was down 79 cents at $27.05.
Under Goldcorp’s latest proposal, which requires at least 50.1 per cent of Osisko shares be tendered, shareholders would receive $2.92 cash and 0.17 of a Goldcorp common share. The company valued the offer at about $7.65 per share based on its share price Wednesday.
That compared with the deal Osisko announced last week that would see Yamana acquire a 50 per cent stake in Osisko’s operations and exploration assets, but allow Osisko to remain an independent company and operator of its mine in Quebec.
Under that Yamana offer, which requires approval by a two-thirds majority vote by Osisko shareholders and optionholders, shareholders would receive $2.194 in cash, 0.2119 of a Yamana share and a new share of Osisko.
The deal would also see the CPP Investment Board increase its existing credit facility by $275 million and the company sell a gold stream of 37,500 ounces per year from Canadian Malartic to the Caisse de depot et placement du Quebec for $275 million that would be used to pay Osisko shareholders.
The companies valued that offer at $7.60 per share, implying shares for a new Osisko — which will retain 50 per cent ownership of its current assets — would be worth $3.35 each.
Osisko said Thursday it would review the revised Goldcorp offer.
“Shareholders are reminded that the corporation recommends that shareholders defer taking any action in respect of the hostile offer until the board of directors of the corporation makes a recommendation as to the merits of the hostile offer,” the company said in a brief statement.
Desjardins analyst Michael Parkin suggested that shareholders may see the higher Goldcorp offer as the favoured bid because of its greater simplicity.
“We believe Yamana will need to increase its offer in order to be successful,” Parkin wrote in a note to clients.
“However, in our opinion, the Yamana offer does provide shareholders with a more direct exposure to the high-quality Canadian Malartic mine and may be a reason for some shareholders to prefer the Yamana offer.”
Yamana has the right to match the new bid and under certain circumstances receive a $70-million break fee.
Osisko’s main asset is the Canadian Malartic gold mine, northwest of Val D’Or, Que., where it has been ramping up operations since commercial production began in May 2011.
The company said earlier this week that Canadian Malartic produced 140,029 ounces gold in the first quarter, a record for the mine.
Osisko said mill throughput is expected to stabilize at approximately 55,000 tonnes per day, while gold production is expected to increase to between 525,000 to 575,000 ounces for the full year.
Canadian Malartic produced 475,277 ounces of gold in 2013.

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