By Alistair MacDonald
Canadian gold companies Yamana Gold Inc. and Agnico-Eagle Mines
Ltd. Wednesday agreed to buy Osisko Mining Corp. for 3.9 billion
Canadian dollars ($3.6 billion), the latest twist in a takeover
saga that should produce one of the largest deals so far this year
in a sector that has seen a steep decline in acquisitions.
This third bid for the Quebec-based company underscores how
mining companies are paying a premium for assets in politically
safe jurisdictions. But despite this deal, and Glencore Xstrata
PLC's $5.8 billion sale of a mine in Peru over the weekend, bankers
say mining companies remain cautious on takeovers after being
punished for past deals.
Wednesday's joint offer will see Osisko shareholders get about
C$1 billion in cash, C$2.3 billion in Yamana and Agnico-Eagle
shares, and a stake in a spinoff company, New Osisko, that the
bidders value at about C$575 million, the companies said.
The offer represented an 11% premium to a rival, hostile bid for
Osisko from mining giant Goldcorp Inc., based on share prices at
Tuesday's close, they said. Following the completion of the
transaction, Osisko shareholders would own about 14% of Yamana and
about 17% of Agnico-Eagle, both of whose shares fell steeply in
morning trade.
The deal would give Yamana and Agnico-Eagle control of Osisko's
flagship Canadian Malartic gold mine in northern Quebec. The mine
has been coveted by Goldcorp and other mining companies not least
for its sheer size and the high grade of its gold deposits, but
because it is located in a developed country. Many mining companies
have struggled in emerging countries where tax rates have been
increased and environmental demands stepped up.
"These assets do not come along that often," Agnico-Eagle Chief
Executive Sean Boyd said on a conference call. "Our political risks
is among the lowest in the country, we feel that is important."
Mr. Boyd and Yamana Chief Executive Peter Marrone said they were
also eager to get their hands on Osisko's exploration properties in
the Kirkland Lake mining camp in Ontario. A Mexico-based project
will be spun out into so-called New Osisko, a unit that will also
hold a small portfolio of other assets and liabilities.
The deal addresses analysts' criticisms that a previous offer by
Yamana could prove too complicated for investors. On April 2,
Yamana had agreed to take a 50% stake in the mining assets of
Osisko, which said it would also sell the rights to a stream of
gold from Canadian Malartic as one part of a wider C$550 million
financing from two big Canadian pension funds.
"The complexity of this new offer is far less than that of the
previously announced Yamana partnership, and we believe this new
bid will be well regarded by shareholders," Michael Parkin, an
analyst at Desjardins Securities, said in a research note.
Analysts had believed nobody would bid against Goldcorp, which
has chased Malartic for five years, when it made its first offer in
what has become at times an acrimonious process.
"When the bid came in from the 800 pound gorilla in January we
figured this was a banana that was going to be lost for sure," Don
MacLean, an analyst at Paradigm Capital, said on a conference
call.
A spokeswoman for Goldcorp, whose cash and stock offer is
currently valued at about C$3.6 billion, wasn't immediately
available to comment. Wednesday's deal contains a C$195 million
breakup fee, large by industry standards.
The $60 billion in mining deals completed last year was the
lowest tally since 2005 and less than half the value of deals
completed the year before, according to Dealogic.
Ben Dummett contributed to this article.
Write to Alistair MacDonald at alistair.macdonald@wsj.com
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