Glamis is offering 0.89 of a Glamis share for each Goldcorp share. The offer values Goldcorp at US$17.80 per share (about C$21.77) and represents a premium of 22.6% based on the volume-weighted average trading price for both companies for the previous 30 trading days on the New York Stock Exchange.
However, late in the day of the bid (Dec. 16), Glamis shares had fallen about 6% to US$17.95 (C$22.15), while Goldcorp was up around 10-11% to US$15.37 (C$19.00). With almost 189 million Goldcorp shares outstanding, Glamis’s bid thus values the company at US$2.6 billion (C$3.2 billion).
By comparison, Goldcorp has been planning to issue Wheaton shareholders one share for each four Wheaton shares held — a premium of about 7% over Wheaton’s average price in the previous month, or a value of C$4.29 per Wheaton share (T.N.M., Dec. 10-16/04).
For Goldcorp shareholders, accepting the Wheaton-Goldcorp combo would be in many ways an endorsement of the deal-making prowess of Wheaton’s management, whereas a Glamis-Goldcorp merger would retain the pure-gold-play nature of both companies.
As a further enticement to any fence-sitters, Glamis’s management emphasizes that it believes there are many ways to streamline operations and boost output at Goldcorp’s prized Red Lake mine, though Glamis is most-experienced as an open-pit gold miner.
There is some drama behind the scenes: Glamis had been reviewing Goldcorp’s assets for a year or so, and had already made the same bid to an independent Goldcorp committee in the week of Nov. 22. That offer was declined by Goldcorp’s board of directors, and the Wheaton deal was unveiled on Dec. 5.
Glamis has already carried out two due diligence reviews of Goldcorp in the past year, so Glamis’s only major conditions are that a minimum of two-thirds of Goldcorp’s shares are tendered and the Wheaton deal is scrapped.
Glamis will mail its takeover bid circular to Goldcorp shareholders in early January, with an expiry date 35 days thereafter. Glamis will hold its own shareholders’ meeting on Feb. 9, 2005.
A successful takeover by Glamis would see Goldcorp’s flagship Red Lake mine in Ontario merged with Glamis’s high-quality gold assets: the rejuvenated Marigold mine in Nevada; the newly producing El Sauzal mine in Mexico’s Chihuahua state; the San Martin mine in Honduras; and the advanced-stage Marlin project in Guatemala.
Total gold production from these five assets alone could grow by 66% to 1.4 million oz. annually by 2007, with cash costs in the neighbourhood of US$120 per oz.
Gold production would be entirely unhedged, and Glamis’s management say they’ll consider continuing Goldcorp’s policy of holding back some gold production when it is advantageous to do so.
The reserve base of the combined companies would be 11.6 million oz., and another 11 million oz. would lie in the resource category. Cash and equivalents would stand at US$500 million, and Glamis reckons that free cash flow could top US$1 billion by 2008.
The market capitalization of the new Glamis would be just under US$6 billion, it which case it would supersede
Speaking at an investors’ meeting in Toronto following the bid’s unveiling, Glamis President Kevin McArthur said he’s “aware that bigger does not necessarily mean better, but we assure you that the new Glamis will be both bigger and better.”
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