Wheaton shareholders knock back Coeur bid (June 08, 2004)

Rejecting a sweetened bid from Coeur d’Alene Mines (CDE-N), shareholders of Wheaton River Minerals (WRM-T) have voted heavily in favour of the company’s proposed merger deal with Iamgold (IMG-T).

More than 79% of the shares voted at the company’s annual meeting on June 8 were in favour of the Iamgold merger, which the two companies had proposed at the end of March. That constituted a rejection of a new bid unveiled by Coeur d’Alene on June 3, offering 0.736 of a Coeur share for one Wheaton share, up from 0.649 in Coeur’s original, May 27 offer.

Coeur issued a statement protesting the vote, saying Wheaton should have postponed the meeting. It had earlier published a news release reporting that institutional proxy advisor Fairvest had revised a previous recommendation that its clients vote in favour of the Wheaton-Iamgold deal, and called on Wheaton to change its proxy deadline, which had been set at two business days before the meeting.

Coeur’s post-meeting statement charged that Wheaton had ignored attempts by shareholders to vote against the proposal, and that only about a third of the shares had been voted at the meeting. Coeur would not comment further on the statement and Wheaton officials could not be reached.

At the same time, Golden Star Resources (GSC-T) saw the Ontario Superior Court deliver a favourable ruling on its confidentiality and standstill agreements with Iamgold. The court said a September 2003 confidentiality agreement between the two gold producers, made when they were considering possible deals, did not prevent Golden Star from launching a formal takeover bid for Iamgold.

The court instructed Iamgold to delay its own shareholders’ meeting, which had also been scheduled for June 8, to June 29.

Golden Star announced it would make a formal bid for Iamgold, under the same terms as its original May 27 proposal to the Iamgold board. That proposal offered 1.15 Golden Star shares for every Iamgold share.

Golden Star’s offer requires a minimum of two-thirds of the shares of Iamgold be tendered and that Wheaton and Iamgold do not complete their merger deal. It also requires access to non-public information held by Iamgold for due-diligence investigations.

The court application came after Golden Star requested a shareholder list from Iamgold to mail out its bid, which came with a letter from Iamgold taking the position that any offer breached the earlier confidentiality agreement.

Iamgold’s board of directors had already rejected the Golden Star bid, describing it as “significantly inferior to the Wheaton transaction.” Iamgold directors argued that a Golden Star merger would dilute Iamgold’s balance sheet and earnings, and expose it to two projects that were behind schedule. Golden Star countered that the merger would be accretive to Iamgold, and pointed out that its bid paid a premium for Iamgold shares, whereas the merger with Wheaton paid a premium for Wheaton shares. The merged company would be 53%-owned by Iamgold shareholders; Iamgold shareholders would have 32% of a combined Iamgold and Wheaton.

Coeur d’Alene’s offer for Wheaton increased its paper bid up to a value of $5.06 “based on Coeur’s closing share price” on May 27 (US$5.06), implying a trade ratio of 0.736 Coeur for one Wheaton share. It also offered $5 per share in cash for Wheaton, up from $4.50; but the cash component of the offer was still capped at $285 million, the same limit prescribed in Coeur’s original offer.

In addition, Coeur had offered up to $5 per Wheaton share in a new series of senior subordinated notes, with a limit of $285 million set on this component of the bid. The notes would bear interest at 9%, would have a term of seven years, and would not be callable for four years.

Any tenders for cash or notes above the $285-million limits would have been settled in common shares at the new trade ratio.

Wheaton shares closed at $3.82 on June 8, down 21 on the day. Iamgold shares finished at $7.20, down 57, making Wheaton shares worth $3.96 based on Iamgold’s bid of 0.55 of a share. Golden Star closed at $6.20, implying that its bid valued Iamgold at $7.13.

On the New York board, Coeur shares were off US19 at US$4.35, equivalent to $5.86 in Canadian funds. That, in turn, implied that Coeur’s bid valued Wheaton shares at $4.31.