Goldcorp may review Osisko offer after Yamana agrees to pay $441.5M in cash and 95.7 million Yamana shares for a 50% stake in Osisko
Last week, Goldcorp Inc.(TSE:G, Mkt cap 22.52B, P/E – , Div/yield 0.06/2.40, EPS -3.59, Shares 812.93M) chairman Ian Telfer expressed confidence that no other company would offer a price high enough to trump its hostile offer for fellow Canadian miner Osisko Mining Corp. (TSE:OSK, Mkt cap 3.22B, P/E – , Div/yield – ,EPS -1.04, Shares 439.60M). He suggested that rivals would prefer to stay on the sidelines to recover from write-downs incurred in previous acquisition rounds.
Today, Osisko Mining Corp. announced that it had agreed to a $1.37B partnership with Yamana Gold Inc. (TSE:YR, Mkt cap 7.19B, P/E – , Div/yield 0.04/1.73, EPS -0.65, Shares 753.31M). Montreal-based Osisko said the deal would see Yamana pay $441.5M in cash and 95.7 million Yamana shares worth $929.6M for the 50% stake in all its mining and exploration assets. The share portion is based on the $6.88 closing price of Yamana’s shares in Toronto on Tuesday April 1st.
The deal is complex and unusual. Osisko has tapped two big Canadian pension funds for additional funding of $550M. Under this agreement, Osisko will increase an existing credit facility with the Canada Pension Plan Investment Board. It will also sell the rights to buy a stream of gold from its Malartic mine in Quebec to the Caisse de dépôt et placement du Québec. This C$550 million, together with the cash from Yamana, will generate about C$1 billion to be distributed to Osisko shareholders, the miner said.
Goldcorp Inc., which lodged its C$2.82 billion bid for Montreal-based Osisko in mid-January, had previously said that it did not see a need to increase its price. As of last week, Goldcorp’s offer for Osisko was valued at C$6.42 per share. Today the shares are up 6.5% to $7.33, implying that investors expect both suitors to improve their offers.
When Goldcorp announced its bid for Osisko, it represented a 15% premium to its share price. While that seemed relatively low compared with other transactions made in the industry in the past, Mr. Telfer said it was in the range of premiums gold investors should expect going forward. Today announcement by Osisko will likely force Telfer and the Goldcorp board to review this assumption.
UPDATE Apr 10 – Goldcorp raises offer for Osisko to $7.47 per share. Read more here>>
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