A week after Goldcorp Inc. Chairman Ian Telfer (in photo at left) said he didn’t expect anyone to thwart his company’s C$2.76 billion ($2.5 billion) hostile bid for Osisko Mining Corp., Yamana Gold Inc. is poised to do just that.
Yamana’s C$1.47 billion offer for 50 percent of Osisko’s assets probably spells the demise of Goldcorp’s plan to buy the whole company, said Adam Graf, a New York-based analyst at Cowen & Co.
“The standing offer that they have should be the final offer, otherwise they risk a value-dilutive transaction,” Graf said of Goldcorp. “In our view, they should not up the ante.”
Yamana and Goldcorp are among producers looking to take advantage of a recent slump in gold prices to replenish their mine reserves and acquire more profitable operations. Osisko’s main asset is the Canadian Malartic project in Quebec, which Goldcorp has said would rank among the company’s top mines.
Telfer said March 25 that he didn’t expect anyone to top his company’s hostile bid for Osisko as rival producers remain deal-shy following writedowns on past takeovers.
Based on trading yesterday, investors now seem far less convinced Goldcorp will step up to beat its rival’s bid. Osisko climbed 7.3 percent to close at C$7.38 in Toronto. That was less than Yamana’s per-share offer valued at C$7.60 as of April 1, and compared with Goldcorp’s cash-and-stock bid, worth about C$6.29.
“The market is telling us this is a done deal,” Bart Jaworski, a Dublin-based resource analyst at Davy Research, said yesterday by phone.
Under the accord with Yamana, Osisko will keep its head office in Montreal, which may appease calls in Quebec for companies to remain based in the French-speaking province. Osisko investors will receive a combination of cash, Yamana stock and new common shares of Osisko. The companies said the deal’s aggregate value was about 10 percent more than Osisko’s closing price the previous day and 22 percent more than the value of the Goldcorp offer.
The Yamana deal also includes the participation of Canada’s two largest pension funds. Osisko agreed to sell a portion of its future gold from Canadian Malartic to Caisse de Depot et Placement du Quebec while the Canada Pension Plan Investment Board will increase an Osisko credit facility. Those agreements will provide Osisko with an additional C$550 million in funding, the company said yesterday.
The involvement of the pension funds may give Goldcorp reason to think twice about making another offer, said Robert Gill, who helps manage C$3.3 billion at Lincluden Investment Management, includingGoldcorp shares.
“It might be difficult to have a deal like this actually come to fruition without some sort of involvement by them,” Gill said by phone.
Jeffrey Wilhoit, a Goldcorp spokesman, didn’t respond to calls seeking comment yesterday. Nick Anstett, a spokesman for Osisko who works for Longview Communications Inc., said Chief Executive Officer Sean Roosen wasn’t available to comment.
Canada Pension, the country’s largest manager of public pension funds, said it evaluated its transaction with Osisko “solely on its investment merits.”
The deal “offers CPPIB an attractive risk-adjusted return,” it said yesterday in a brief e-mailed statement.
The Caisse denied Osisko’s presence in Montreal was a consideration in its participation in the deal. The provincial government, which announced in February a proposal to protect Quebec companies from hostile takeovers, also wasn’t a factor in the deal, the fund said.
The Caisse, which is Osisko’s fourth-largest shareholder, invested in Osisko’s future gold production because it’s a sound transaction that meets its risk-return criteria, Maxime Chagnon, a spokesman, said yesterday by phone from Montreal.
For its part, the Quebec government said it supported the Yamana-Osisko deal because it would discourage other offers and keep Osisko based in Montreal, a goal shared with the Caisse.
“The involvement of the Caisse allows Osisko to preserve its future and gives it substantial means to resist other takeover offers that would deprive Quebec of an important head office,” Quebec Finance Minister Nicolas Marceau said yesterday at a press conference in Montreal amid the provincial election campaign. “The involvement of major institutional investors like the Caisse sends an important signal to the market.”
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