Goldcorp Inc., the world’s second-biggest gold miner by market value, raised its hostile bid for Canada’s Osisko Mining Corp. to about C$3.29 billion ($3.01 billion) to compete with an offer by Yamana Gold Inc.
Goldcorp said today in a statement it will pay C$7.65 in cash and stock for each Osisko share, based on closing prices yesterday. That was about 19 percent more than its initial bid made in January. Yamana agreed April 2 to acquire 50 percent of Osisko’s assets in a deal that it said at the time valued the whole company at C$7.60 a share.
The fight for Osisko follows last year’s slump in gold prices that dragged down the valuation of producers and created an opportunity for companies looking to add mines to replenish their reserves. Yamana and Vancouver-based Goldcorp covet Osisko’s main asset, the Canadian Malartic operation. Goldcorp Chief Executive Officer Chuck Jeannes has said he would rank the Quebec project among his company’s top mines based on free cash flow, output and net asset value.
Goldcorp was granted access to complete due diligence on Montreal-based Osisko as part of a settlement of a lawsuit in which Osisko tried to block the offer. The revised bid will expire April 22 and the minimum tender requirement is now 50.1 percent of Osisko’s shares.
“The recent completion of our due diligence process has confirmed the technical and financial merits of our decision to acquire Osisko,” Jeannes said in today’s statement.
Osisko rejected Goldcorp’s initial offer as too low. CEO Sean Roosen said today that while his company will review the bid, Goldcorp’s proposal still wouldn’t give Osisko shareholders a direct stake in Canadian Malartic, unlike the Yamana deal.
Osisko rose 0.4 percent to C$7.58 at the close in Toronto, while Goldcorp fell 3.6 percent to C$26.84. The decline in Goldcorp’s share price reduced its bid to C$7.48 a share, while the Yamana-Osisko proposal rose to C$7.54. That number is based on the companies’ ascribed value of C$3.35 for shares in Osisko following the transaction.
Goldcorp disputes the valuation placed on the new Osisko shares, Jeannes said at a press conference today, declining to provide his own estimate of the value.
Yamana CEO Peter Marrone said earlier today his deal “implies a value well in excess of the other offer.” The increased offer by Goldcorp “validates our long-standing and clear view that Osisko is worth substantially more than what was reflected in the market,” Marrone said in an e-mailed statement.
Under the accord with Yamana, the fourth-largest Canadian gold miner by sales, Osisko will keep its head office in Montreal and sell a portion of its future gold from Canadian Malartic to Caisse de Depot et Placement du Quebec, a pension fund. Osisko also agreed with the Canada Pension Plan Investment Board to increase a credit facility. The accords with the two pension funds will provide the miner with an additional C$550 million in funding.
“With so many moving parts to the Yamana deal, the greater simplicity and amount offered by Goldcorp is likely to be viewed as the favored bid,” Michael Parkin, a Toronto-based analyst at Desjardins Securities Inc., said in a note today. “We believe Yamana will need to increase its offer in order to be successful.”
GMP Securities LP and Scotiabank are Goldcorp’s financial advisers on the bid while its legal advisers are Cassels Brock & Blackwell LLP, Neal Gerber & Eisenberg LLP and Gowling Lafleur Henderson LLP, according to data compiled by Bloomberg.
BMO Capital Markets is Osisko’s financial adviser and its legal counsel is Bennett Jones LLP and Skadden, Arps, Slate, Meagher & Flom LLP, the data show.