McEwen to battle Goldcorp-Glamis merger

Vancouver – Goldcorp‘s (G-T, GG-N) founder and ex-chairman Robert McEwen has dropped the gloves and launched an opening salvo in a proxy fight opposing the company’s plan to merge with mid-tier producer Glamis Gold (GLG-T, GLG-N) without seeking shareholder approval. The proposed deal would see Goldcorp issue 1.69 shares for every Glamis share in a deal initially valued at about US$8.6 billion.

Rob McEwen, also Goldcorp’s largest individual shareholder holding about 1.5%, has fired off a letter to the company’s board of directors stating it is non-compliant with the Ontario Business Corporations Act for failure to convene a shareholders meeting to vote on the proposed merger with Glamis Gold. He alleges that Goldcorp is attempting to circumvent shareholder protection mechanisms in place under corporate law. “The fact is, Goldcorp is an Ontario corporation and it should not do indirectly, through a wholly owned special purpose vehicle, what it can’t do directly,” stated Rob McEwen.

Many Goldcorp shareholders expressed opposition to the planned business combination following its announcement in late-August, citing the proposed deal as excessively dilutive (issuing 67% more stock, about 282 million shares). Goldcorp shares dropped about 15% following that release while conversely, shares of Glamis rallied about 18%.

Glamis shareholders will be entitled to vote on the merger, with a two-thirds vote in favour required for it to pass. Boards of both companies have already approved the deal and they expect it to close in November subject to some regulatory considerations.

Additionally, the merger agreement has Glamis agreeing to pay a US$215-million break fee to Goldcorp under certain circumstances, which also retains rights to match any competing offers. Upon successful completion of the combination, Goldcorp and Glamis shareholders will hold 60% and 40% of the new Goldcorp respectively, with the companies holding board representation on that same ratio.

In a press release posted on his website eliciting support from shareholders wishing to vote on the matter, McEwen further comments “Glamis has indicated that if the proposed transaction is unsuccessful due to Goldcorp’s shareholders voting it down, they would sue the Company for a large sum of unspecified damages. While that would be most regrettable, if this happens, Goldcorp and its shareholders may very well have their own remedies against the board and management of Goldcorp so that shareholders do not have to pay for their mistakes.”

Rob McEwen contends the deal will destroy Goldcorp shareholder value and exposes the company to an increasing amount of geopolitical and operation risk.

On the day of McEwen’s planned proxy fight announcement shares of Goldcorp closed up 89 to the $25.50-level (52-week range of $20.57-to-$45.99) in TSX trading while Glamis shares gained $1.25 to close at $42.44 (52-week range of $22.35-to-$53.05) on September 26th.