VANCOUVER ( Dow Jones ) --Goldcorp Inc. ( GG ) shares are up 9.9% Thursday after Glamis Gold Ltd. offered 0.89 of a share for each Goldcorp share, potentially derailing Goldcorp's friendly plan to acquire Wheaton River Minerals Ltd. ( WHT ) .
Glamis said it has been negotiating in the past year with Goldcorp, and made the same share-exchange offer to Goldcorp a few weeks ago, but it was rejected in late November. Goldcorp announced plans Dec. 5 to buy Wheaton River in a share swap.
On a conference call, Glamis officials said their understanding is that Goldcorp's independent board committee was in favor of Glamis's bid, but that it was rejected by the entire Goldcorp board.
Glamis decided to present the offer directly to Goldcorp shareholders, Glamis president and chief executive Kevin McArthur said.
When asked by one analyst if Glamis wasn't just acting as "spoiler" in the Goldcorp-Wheaton deal, McArthur said: "We look at Wheaton River being the spoiler."
Wheaton chief executive Ian Telfer "was well aware that there was a process going here," and the Goldcorp-Wheaton deal happened out of the blue, after there had been negotiations between Glamis and Goldcorp, McArthur said.
Glamis doesn't have any commitments from major Goldcorp shareholders to tender their shares, but McArthur said he has talked to many who are supportive.
He said he hopes Goldcorp allows its shareholders time to consider the offer.
Glamis had done due diligence on two occasions on Goldcorp's Red Lake mine in northwestern Ontario, "and we certainly liked what we saw," McArthur said.
If its bid is successful, the resulting entity would have a seasoned management team "from both sides;" a low-risk operational base with four mines, in Ontario, Nevada, Mexico and Guatemala; and the deal would remove Goldcorp's single-mine risk, McArthur noted.
Future acquisitions would likely also be in the Americas, he said.
With more than 1 million ounces of unhedged gold production and no base-metals production, the combined Glamis-Goldcorp entity would offer a "clear" alternative to the senior gold producers, and would have the trading liquidity of a senior stock, McArthur said.
Both companies "believe in gold," McArthur said, but he declined to say whether the new entity would hold back some gold production from sale, as Goldcorp does. "I'm frankly supportive of it," McArthur said of the practice, adding that he wanted to get feedback from shareholders. "I think it ( gold ) is going higher and I think it's a good idea," McArthur said.
In a brief research note, UBS analyst Tony Lesiak said Glamis is using its higher stock valuation to make a hostile offer for Goldcorp, which trades at a lower premium to net asset value.
"The 23% premium appears dilutive to Glamis as no synergies can be expected," Lesiak wrote. "The concern is whether it will retain its premium rating."
The key benefit to Goldcorp would be that it will continue as a larger pure-gold play, but with less potential for an upward rerating in the marketplace than it would have with Wheaton River, Lesiak said.
As reported, Glamis said its implied offer for Goldcorp is $17.80 a share, a premium of 27% to Goldcorp's closing price Wednesday of $13.98.
A second Canadian mining analyst said he thinks Goldcorp shareholders will be more amenable to receiving a premium than paying one to acquire Wheaton River.
As for other potential bidders emerging for Goldcorp, this analyst said there have been long-standing quesions about whether Placer Dome Inc. ( PDG ) , which operates the Campbell mine beside Goldcorp's Red Lake mine in northern Ontario, would make a move to acquire Goldcorp. "Placer has always been one that's kicking around, and I wouldn't discount that," the second analyst said. "The last year for M&A in the gold world has been an absolute crazy one, so anything can happen at this point," the analyst said.
But on the call, Glamis CEO McArthur said "we're unaware of any senior companies in this process, we have good intelligence that they aren't in the process and time will tell on that."
Glamis said its offer for Goldcorp is conditional on no deal being struck between Goldcorp and Wheaton River Minerals, among other items. |
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