Agnico, Yamana in $3.54 Billion White Knight Osisko Bid

Agnico Eagle Mines Ltd. and Yamana Gold Inc. agreed to jointly acquire Osisko Mining Corp. for C$3.9 billion ($3.54 billion), the latest twist in a battle for control of a Quebec mine that now involves three of Canada’s largest gold producers.

Yamana and Agnico’s cash-and-stock offer for Montreal-based Osisko is valued at C$8.15 a share, they said in a statement today. That trumps a hostile offer from Vancouver-based Goldcorp Inc. currently valued at about C$7.38 a share, according to data compiled by Bloomberg.

The fight for Osisko is focused on its Canadian Malartic gold mine, which Goldcorp Chief Executive Officer Chuck Jeannes has said would rank among his company’s top mines. The bidding war also marks a revival for gold-mining mergers and acquisitions. The biggest annual gold-price decline in three decades has dragged down valuations of producers and created opportunities for miners seeking to add capacity and replace reserves.

Malartic Deposit

Canadian Malartic is valuable for its large gold deposit and because Quebec is an attractive jurisdiction for mining companies, according to Osisko CEO Sean Roosen. Agnico Eagle and Yamana also believe they can improve the mine’s operations because of experience they have in developing and operating large pits, both companies’ CEOs said on a conference call today. They also see potential in some of Osisko’s exploration assets.

Osisko rose 7 percent to C$7.94 at the close in Toronto. Yamana fell 4 percent to C$8.83, Agnico Eagle dropped 8.2 percent to C$30.71, and Goldcorp gained 0.8 percent to C$26.22.

The current value of the offer announced today is C$7.86 per Osisko share.

Yamana and Agnico, Canada’s fourth and fifth-largest gold producers by sales respectively, will jointly operate Canadian Malartic and some exploration assets after the deal closes.

New Offer

Under the offer announced today, for each Osisko share, investors will receive C$2.09 in cash, 0.07264 of an Agnico Eagle share and 0.26471 of a Yamana share. They will also get one share in a new company, with a value of C$1.20, that will be spun out to hold certain Osisko assets, including a 5 percent net smelter royalty from output at Canadian Malartic.

In the event of another, superior offer, Osisko will pay Agnico and Yamana a termination fee of C$195 million.

“We believe this new bid will be well regarded by shareholders,” Michael Parkin, a Toronto-based analyst at Desjardins Securities Inc., said in a note today. “The complexity of this new offer is far less than that of the previously announced Yamana partnership.”

Today’s deal replaces a transaction announced April 2 in which Yamana agreed to buy 50 percent of Osisko’s assets. The two companies said then the deal valued Osisko at C$7.60 a share. That transaction included funding to Osisko from two Canadian pension funds, which wasn’t included in today’s deal.

Hostile Bid

Goldcorp, the second-largest Canadian gold miner by revenue, responded April 10 by raising its hostile cash-and-stock bid and lowering the minimum tender condition to 50.1 percent of Osisko shares. Its current offer is set to expire April 22.

Goldcorp shouldn’t raise its offer, because a higher bid would be dilutive to its net asset value, Barry Allan, a Toronto-based analyst at Mackie Research Capital Corp.

“Goldcorp does not need OSK’s assets this badly,” he said in a note, referring to Osisko by its Toronto ticker. “Any benefit to Goldcorp has been priced out.”

Christine Marks, a spokeswoman for Goldcorp, didn’t respond to a phone call or e-mail seeking comment.

Yamana’s financial adviser is Canaccord Genuity Corp., and Norton Rose Fulbright Canada LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are its legal advisers. National Bank Financial Markets was hired to provide a fairness opinion.

Agnico Eagle is being advised by TD Securities Inc. and Bank of America Merrill Lynch. Davies Ward Phillips & Vineberg LLP is its legal adviser.

Osisko’s financial advisers are BMO Capital Markets and Maxit Capital LP. Bennett Jones LLP and Stikeman Elliott LLP are its legal advisers.

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