Wheaton-Goldcorp deal comes out on top

Goldcorp (G-T) has declared its bid for Wheaton River Minerals (WRM-T) a success after 69% of the shares of Wheaton had been tendered to Goldcorp’s bid by the end of business on Monday, Feb. 14.

Goldcorp’s bid of one Goldcorp share for four Wheaton shares was conditional on two-thirds of Wheaton’s shares being tendered to the offer by Feb. 14. It now plans to take up remaining shares at the terms of the offer by Feb. 28, and will move for a compulsory acquisition at a special meeting of Wheaton shareholders on April 12.

The friendly deal between Goldcorp and Wheaton beat back a takeover bid for Goldcorp from Glamis Gold (GLG-T), which had offered 0.92 of a Glamis share for each Goldcorp share. That bid was scotched by a Goldcorp shareholder vote Feb. 10 that approved a motion allowing Goldcorp to issue enough shares for the Wheaton takeover. The motion received 65% of the votes cast, with 57% of Goldcorp shares being voted at the meeting.

Glamis had made the rejection of the bid for Wheaton a condition of its takeover offer. Glamis shareholders had previously approved a similar motion allowing their company to issue shares in its Goldcorp bid.

A special dividend of 62 (US50) for Goldcorp shareholders will now go ahead, in advance of the payout of shares to Wheaton shareholders. That dividend was a response to a last-minute increase in Glamis’s offer, from 0.89 Glamis shares, which represented about a 60-per-share increase in the value of the bid.

Wheaton shareholders will own 43% of the new company, which will keep the Goldcorp name but move its head office to Vancouver. Goldcorp’s chief executive, Robert McEwen, will be chairman, and Ian Telfer of Wheaton River remains as chief executive.

Warrants for Wheaton shares will be exercisable for Goldcorp shares at the same ratio as the takeover exchange. The warrants, which are all exchangeable for one Wheaton share at their exercise prices, will be exchangeable at a ratio of four warrants for one Goldcorp share, at four times the exercise price.

Wheaton has 572 million shares outstanding, plus 55 million regular warrants (wrm.wt-t), 57 million Series A warrants (wrm.wt.a-t), and 64 million Series B warrants (wrm.wt.b-t). If all the warrants were exercised, they would represent 44 million Goldcorp shares issued for $383 million, or $8.71 per share. Goldcorp has 190 million shares outstanding.

Telfer said the special dividend to Goldcorp shareholders would not affect Goldcorp’s existing dividend policy, one of the most generous in the gold business.

The Feb. 10 shareholder vote was the critical point in the fight between Glamis and Goldcorp, which had turned into a war of words between Telfer and McEwen, on the one hand, and Glamis’s chief executive, Kevin McArthur, on the other. McArthur said, in a prepared statement after Glamis abandoned the bid, that “to increase our offer for Goldcorp would not show good fiscal discipline.”

The takeover battle with Glamis also exposed some divisions in the Goldcorp board, with two directors abstaining from making a recommendation against the Glamis bid.

Both Telfer and McEwen said they knew the vote would go their way, a fact underlined by trays of champagne brought into the shareholder meeting before the vote was counted. Telfer said they had the advantage of seeing both “yes” and “no” proxies coming in, whereas Glamis could only count on the “no” proxies that had been delivered to it directly. “They just thought they had more than they had,” said Telfer.

Telfer suggested that the Goldcorp-Wheaton deal might set dominoes falling among the mid-tier gold producers, which have not succeeded in making merger deals work up to now. Wheaton, for example, had a friendly takeover bid from Iamgold (img-t) derailed by hostile bids from Coeur d’Alene Mines (CDE-N) for Wheaton and Golden Star Resources (GSC-T) for Iamgold. Both hostile bids failed too, but not before Iamgold shareholders turned back a shareholder vote to allow the Wheaton merger.

Iamgold subsequently arranged a deal with Gold Fields (GFI-N), which would have seen Iamgold combine its assets with Gold Fields assets outside southern Africa to create Gold Fields International. After a hostile bid for Gold Fields from Harmony Gold Mining (HMY-N) surfaced, Gold Fields shareholders rejected the Iamgold deal.

Telfer also suggested that hostile bids would drop off, now that several had failed at significant costs to the bidders.

Telfer said McEwen’s image among Goldcorp shareholders was decisive for much of the retail vote. “Rob’s clients — he brought them into gold. They tend to follow him.”