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Goldcorp Inc. has launched a $2.6-billion hostile bid for rival Osisko Mining Corp. in a deal that would boost Goldcorp’s reserves and give it control of one of the biggest gold mines in Canada.
The bid, valued at $5.95 a share, was a 15-per-cent premium for Osisko shares based on last Friday’s closing prices. Osisko’s stock price shot up 20 per cent to $6.24 Monday, higher than Goldcorp’s offer, suggesting investors expect a richer bid to emerge.
The takeover bid marks a rare move in the mining industry over the past year, as companies have focused largely on cutting costs and preserving cash amid a deep slump in gold prices and gold miners’ shares. The offer signals industry valuations have fallen to a level where it makes sense for some mining companies to make acquisitions after they spent the past two years writing down assets bought during the commodity boom.
Goldcorp’s chief executive Chuck Jeannes said the Osisko transaction is not about Goldcorp getting bigger.
“Our strategy has never been about size,” Mr. Jeannes said on a conference call. He said Goldcorp has a history of being disciplined and suggested that he would not get into a bidding war for Osisko.
“At this time I am not willing to go up higher,” he said in an interview.
In Montreal to announce the deal and meet with Goldcorp investors, Mr. Jeannes said his shareholders liked the offer and pointed to Goldcorp’s relatively low dip in share price. Goldcorp fell 1 per cent to $25.04 after the deal was announced.
“Our shareholders understand the deal and think it makes sense,” Mr. Jeannes said.
Vancouver-based Goldcorp is offering $2.26 in cash plus 0.146 Goldcorp share for every Osisko share. The offer is 60 per cent lower than Osisko’s share price of $15.95 in 2010 and the premium is lower than the 30 per cent-plus premiums offered when commodity prices were soaring.
Quebec-based Osisko owns the Malartic gold mine in Quebec, a coveted industry asset.
Cowen Securities analyst Adam Graf called it “very attractive.” Dundee Capital Markets analyst Joseph Fazzini said Malartic is a world-class operation and should command a higher premium.
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