Osisko Cuts Goldcorp Out, Inks Deal with Yamana GoldOsisko Mining (TSX:OSK) is still trying to fend off a hostile takeover by Vancouver-based Goldcorp (TSX:G). In its latest efforts, the Montreal-based company will be selling a 50-percent stake in its mining and exploration assets to Yamana Gold (TSX:YGI) in a cash-and-stock deal that places Osisko’s value at roughly $3.4 billion. 

Per the agreement, Yamana will pay C$441.5 million in cash and 95.7 million common shares for an aggregate value of C$929.6 million. In exchange, Osisko shareholders will received C$2.194 in cash and 0.2119 of a Yamana share, plus a new common share of Osisko for an implied value of $7.60 per Osisko share. Through this deal, Yamana will become an equal partner in all of Osisko’s mining and exploration assets, including the Canadian Malartic gold mine, which is of specific interest to Goldcorp.

Beyond that, Osisko has entered into a binding commitment agreement with CPPIB Credit Investments and La Caisse de dépôt et placement du Quebec for the sale of a gold stream on Canadian Malartic. The gold stream agreement, combined with the increase in credit facility, will provide Osisko with a total of C$550 million. Add to that the cash consideration from Yamana, and the company is looking to generate roughly C$1 billion for its shareholders.

In comparison, Goldcorp had offered Osisko shareholders 0.146 of a Goldcorp share plus $2.26 in cash per common share of Osisko in a deal worth $6.21 per share as of Tuesday’s close.

Sean Roosen, CEO of Osisko told investors in a statement that the company ”worked carefully and diligently over the past two months to bring this deal to shareholders,” adding that “Osisko will continue to follow its ideals and principles, with our primary objective being to maximize shareholder value as we work to grow the free cash flow from our assets and return benefits to Osisko’s owners through the planned implementation in 2014 of a significant dividend program.”

On the other hand, Peter Marrone, CEO of Yamana Gold, commented, “[this transaction] creates a strategic operating partnership between two industry-leading companies with world-class operating and management teams. With forces combined, we can leverage [our] accomplishments and skill sets to create greater value for all of our shareholders.”

In a Wednesday conference with analysts and investors, Roosen explained that the deal gives the company strong partners moving forward.

The Financial Post commented on the uniqueness of the deal, noting that two of Canada’s largest pension funds, which were already existing Osisko lenders, are participating.

Osisko’s board has unanimously approved of the deal with Yamana, and the company will be holding a special meeting with shareholders in May to vote on the transaction.

Meanwhile, the market reacted positively to today’s news, with the Toronto stock market staying in positive territory following the news. The S&P/TSX composite closed up on Wednesday by 78.56 points, driven primarily by the gold sector. Gold also saw some support on Wednesday, with gold for June delivery climbing $10.80 to close the day at $1,290.80 on the New York Mercantile Exchange.

Osisko Mining closed on Wednesday up 6.83 percent at $7.35 on the Toronto exchange. Meanwhile, Yamana Gold was down slightly, closing at $9.48.

 

Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.