(In penultimate paragraph, corrects market cap rankings)
* C$5.95/shr cash-and-stock offer represents 15 pct premium
* Goldcorp says bid to remain open until Feb. 19
* Osisko shares up 19 percent; Goldcorp shares slip
By Euan Rocha
TORONTO, Jan 13 Goldcorp Inc launched an
unsolicited cash-and-stock bid to acquire smaller rival Osisko
Mining Corp for C$2.6 billion ($2.4 billion) on Monday,
in a move to gain control of Osisko's Malartic gold mine in
The takeover bid is the Canadian gold sector's first major
attempt at a merger and acquisition deal in nearly a year.
Miners stung by a 25 percent drop in the price of gold over the
last 12 months have focused on cutting costs and slowing down
work on growth projects.
The acquisition of the large low-grade Malartic deposit will
boost Goldcorp's proven and probable reserves by some 10 million
ounces, but it also carries its own set of perils.
"Given the low grade of the reserves, the Osisko assets will
be relatively susceptible to any further weakness in the gold
price, though the Canadian dollar will help protect the domestic
mining industry," wrote JPMorgan analyst John Bridges in a note
The Canadian dollar hit a four-year low against the U.S.
dollar last week, after data showed the country unexpectedly
shed jobs last month. A weak Canadian dollar typically helps
miners with assets within Canada, as most of their costs are
denominated in Canadian dollars, while gold sales are in U.S.
Vancouver-based Goldcorp's bid, which works out to C$5.95
per share, represents a 15 percent premium to Osisko's closing
share price on Friday.
Goldcorp said Osisko shareholders would receive 0.146 of a
Goldcorp share plus C$2.26 in cash for each share they own. The
bid will be open until Feb. 19.
Shares in Osisko rose 19 percent in early trading on the
Toronto Stock Exchange to C$6.18, indicating that investors are
expecting Goldcorp to sweeten its offer.
"Our clear preference remains to engage with Osisko, as we
strongly believe in the compelling strategic and financial
merits of this transaction to the mutual benefit of both
companies' shareholders," said Goldcorp's Chief Executive Chuck
Jeannes in a statement.
A spokeswoman for Osisko was not immediately reachable for
With most major gold miners from Barrick Gold Corp
to Newmont Mining Corp struggling with a major setbacks
on key growth projects, analysts doubt that Osisko will be able
to find a white knight to counter the Goldcorp bid.
"Given the depressed Osisko share price and Goldcorp's track
record of identifying value, some owners may hold out for a
better bid, but given Goldcorp's industry dominance we don't
expect to see a superior bid," said Bridges.
Goldcorp said its offer will not require the approval of its
own shareholders. The miner has obtained a $1.25 billion credit
facility from Scotiabank which, together with cash on hand, and
an undrawn $2 billion credit facility, will be sufficient to
fund the cash portion of the offer.
Malartic, Osisko's only operating mine, is likely to produce
500,000 to 600,000 ounces of gold per year over its 16-year mine
life, according to the company's website. The mine located in
the prolific Abitibi mining district began commercial production
in May 2011.
Osisko also owns the Hammond Reef and the Kirkland Lake gold
projects in Northern Ontario.
"Overall, we believe that both the producing mine as well as
the potential development assets fit well within the
geographical risk profile of Goldcorp's current portfolio of
mines, which are located across North and South America," wrote
Barclays analyst Farooq Hamed in a note to clients.
Goldcorp has said it expects to produce between 3.0 million
and 3.15 million ounces of gold this year, an increase of 13 to
18 percent from 2013.
Goldcorp was until recently the world's largest gold company
by market capitalization, but it was surpassed again by Barrick
Gold, after the world's biggest gold producer issued $3 billion
in equity late last year.
Goldcorp's shares, which closed at C$25.29 on Friday on the
Toronto Stock Exchange, fell 3.6 percent to C$24.38 in early
trading on Monday. Its New York-listed shares fell 3.5 percent
after the morning bell on Monday.
($1 = 1.09 Canadian dollars)
(Reporting by Euan Rocha in Toronto and Swetha Gopinath in
Bangalore; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila
and Chizu Nomiyama)