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MONTREAL – Osisko Mining Corp. chief executive Sean Roosen had to come back to his shareholders with an attractive alternative to Goldcorp Inc.’s bid or risk embarrassment. What he’s given them instead is a tricky transaction with Yamana Gold Inc. and two pension funds that the market is still struggling to digest.
Now, with its bid set to expire Friday, Goldcorp has to decide whether to raise its offer or walk away in a politically charged battle for Canada’s largest gold mine.
In a surprise agreement that values Osisko at about $3.4-billion, Toronto-based Yamana said Wednesday it will buy a 50% interest in Montreal-based Osisko’s mining and exploration assets. The two companies would be equal partners in Osisko’s operations and Osisko would maintain its head office in Montreal. Osisko’s flagship Malartic gold mine in Quebec would be run through a joint operating committee.
“This allows our Osisko shareholders to maintain their ownership in Canadian Malartic [while monetizing] shareholders who want to receive liquidity,” said Mr. Roosen, who owns 5% of Osisko. “We have a long-term view … Goldcorp jumped hostile on us just as we were about to start to enjoy the benefits of this mine for the shareholders.”
Under the deal, Yamana will pay $441.5-million in cash plus 95.7-million in Yamana shares worth $929.6-million for total consideration of $1.37-billion. Each Osisko shareholder will receive $2.19 per share in cash, roughly one-fifth of a Yamana common share, and a new share of Osisko valued at $3.35. In all, the implied value for current Osisko stock is $7.60 per share.
Terms call for Osisko to transfer all of its mining assets into a general partnership, in which Yamana would then acquire a 50% interest. Paying a premium without winning control is unusual in itself.
But the deal is also unique in the participation of two of Canada’s largest pension funds, which happen to be existing Osisko lenders.
Montreal-based Caisse de dépôt et placement du Québec will give Osisko a $275-million upfront payment in return for a stream of future production from Malartic. Analysts estimate this is worth at least $315-million to the Caisse. The pension fund also gets a guaranteed minimum return of 8% in the event it exercises its right to sell the asset back to the Osisko partnership.
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