TORONTO/VANCOUVER Goldcorp Inc (G.TO) raised its hostile takeover offer for Osisko Mining Corp (OSK.TO) on Thursday, squeaking above a white knight bid by Yamana Gold Inc (YRI.TO) and heightening a bidding war that has helped inject life into a depressed gold mining sector.
Vancouver-based Goldcorp, the world's second-biggest gold miner by market value, said early on Thursday it increased its offer for Osisko by some 38 percent to about C$3.6 billion ($3.3 billion), or C$7.65 a share.
Osisko is a smaller Canadian gold miner with one producing mine, Canadian Malartic in Quebec. The mine is an attractive asset as it is large and low-cost and located in a stable political jurisdiction.
Goldcorp shares fell nearly 4 percent following the news, reducing the value of its cash-and-stock bid to around C$7.47 a share. Still, the offer remained around 4 percent higher than Yamana's cash-and-shares offer, based on analysts' estimates.
Yamana, another Canadian gold miner, launched a complex offer for 50 percent of Osisko's assets last week. It said at the time that its offer was valued at C$7.60 a share although analysts have pegged it lower than that.
Some Osisko shareholders said the new Goldcorp bid was no blockbuster.
Goldcorp "haven't done that knockout bid where they forced me to tender," said Charles Oliver, senior portfolio manager at the Sprott Gold and Precious Minerals Fund, which has C$214 million of assets under management. Osisko was the fund's second-biggest holding at the end of March.
Oliver, describing the Yamana deal as "a little complex", said he did not plan to tender his Osisko stock to either offer, preferring Osisko as a standalone company.
Osisko shares closed 0.5 percent higher at C$7.58 on the Toronto Stock Exchange on Thursday. Goldcorp's were down 3.9 percent at C$26.78, and Yamana's were down 1.7 percent at C$9.44.
The fight for Osisko is the first major takeover tussle in the Canadian gold industry in more than a year. Dealmaking dried up after many miners wrote down the value of billions of dollars of assets that they had purchased at sky-high prices as the bullion price ran up in the last decade.
GOLDCORP DOESN'T RULE OUT RAISING BID
Yamana Chief Executive Officer Peter Marrone said in an emailed statement that Goldcorp's raised bid "validates a view that we were modest and even conservative in our initial view of the value of new Osisko".
He did not say if Yamana would consider raising its bid.
Goldcorp CEO Chuck Jeannes said his company's raised offer was full and fair but he did not rule out raising the bid if Yamana came back with a higher offer.
Speaking to reporters in Toronto, he said Goldcorp no longer sees room for a friendly transaction with Osisko.
The arrangement with Yamana would see Osisko's assets transferred to a partnership owned 50-50 by a new Osisko and Yamana. The deal would be financed in part by debt and a new streaming deal. Osisko shareholders would get C$2.194 in cash, 0.2119 of a Yamana share and a new common share of Osisko for each share they own.
The Yamana offer's value depends on the price at which the new Osisko shares would trade, a level that is difficult to forecast precisely. Veritas Investment Research analyst Pawel Rajszel estimated the new Osisko shares to be worth C$2.99 on April 3, while analysts at RBC Capital Markets pegged them at C$3.03. Yamana and Osisko have put the value at C$3.35 a share.
"(Goldcorp) maybe made it a matching bid, but it's far from being a superior bid at this point, in my view," Osisko CEO Sean Roosen told Reuters. "But we'll take it to the special committee with our advisers, and we'll review it."
Goldcorp's raised offer comes two days after Roosen said that it would be tough for Goldcorp to trump Yamana Gold's offer.
Goldcorp said it would offer 0.17 of a Goldcorp share and C$2.92 in cash for each Osisko share. Before the Toronto Stock Exchange opened for trading on Thursday the offer represented a premium of 1.3 percent to Osisko's closing price of C$7.55 on Wednesday.
"It's a dime more than Yamana's offer. Goldcorp is not taking this thing seriously and I am disappointed in them," said
John Kinsey, a portfolio manager at Caldwell Securities, which owns a small position in Osisko's shares.
He said he wanted to see a bid at around C$8 a share.
Goldcorp said it was dropping its minimum tender threshold to 50.1 percent from 66.7 percent, and extending the expiration date of its offer to April 22.
Goldcorp's first offer, made in January, had worked out to C$5.95 per share.
(With additional reporting by Ashutosh Pandey in Bangalore; Editing by Savio D'Souza, Jeffrey Hodgson and Peter Galloway)