Glamis goes for Goldcorp (January 07, 2005)

Glamis Gold (GLG-T) has begun mailing its offering circular to Goldcorp (G-T) shareholders after formally filing its takeover bid with regulators in Canada and the United States.

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. At current prices the premium amounts to just shy of 2%.

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 shares being tendered.

"Based on all of the advantages of a Glamis-Goldcorp combination, we are confident that the Goldcorp shareholders will vote to reject the bid for Wheaton River and tender their shares to the Glamis offer,” said Glamis’s CEO Kevin McArthur in a prepared statement.

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

Meanwhile, Glamis put a bit of spit and polish on itself, forecasting production of 400,000 oz. of gold in 2005, up 70% from current levels. The expected increase is mostly owing to the recent start up of its El Sauzal mine in Mexico. The company produced 234,433 oz. of 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; Glamis shares were 22 higher at $19.48. For their part, Wheaton’s issue was off a penny at $3.97.4