Glamis goes for Goldcorp (January 17, 2005)

Having formally filed its takeover bid with regulators in Canada and the U.S., Glamis Gold (GLG-T) is mailing its offering circular to shareholders of Goldcorp (G-T).

The Reno, Nev.-based miner is looking to break up Goldcorp’s “friendly” plan to merge with fellow Canadian miner Wheaton River Minerals (wrm-t) by offering Goldcorp shareholders 0.89 of one of its own shares for each Goldcorp share. Glamis says the exchange ratio values Goldcorp at $17.80 per share, or a 22.6% premium, based on each company’s average share price in Toronto during the month before the bid’s unveiling on Dec. 16, 2004. At current prices, the premium amounts to just shy of 2%.

Goldcorp said it would review Glamis’ bid, but at first glance it appeared to be unchanged from the previously rejected non-binding proposal.

Under its own plan with Wheaton, Goldcorp would exchange one of its shares for every four shares of Wheaton. Unveiled in early December, the scheme represented a 7% premium over Wheaton’s average price during the previous month. At current share prices, the premium rings in at 10%.

Goldcorp shareholders will vote on their company’s proposal on Jan. 31; a defeat would leave Goldcorp on the hook for a US$35-million break-up fee payable to Wheaton. The deal is also contingent on two-thirds of Wheaton’s shares being tendered.

“Based on all the advantages of a Glamis-Goldcorp combination, we are confident the Goldcorp shareholders will vote to reject the bid for Wheaton River and tender their shares to the Glamis offer,” says Glamis CEO Kevin McArthur.

Glamis’s plan will be put to a shareholder vote in February. The bid is subject to Goldcorp’s shareholders rejecting their company’s planned merger with Wheaton, and the subsequent tendering of at least two-thirds of Goldcorp’s shares.

Meanwhile, Glamis has forecast production of 400,000 oz. gold in 2005, up 70% from current levels. The increase reflects startup of El Sauzal mine in Mexico. Glamis produced 234,433 oz. gold in 2004, up 1.8% from 2003.

News of the bid launch sent shares in Goldcorp 23 higher to $17 in late afternoon trading in Toronto on Jan. 7; Shares in Glamis were 22 higher at $19.48. Wheaton was off a penny at $3.97.