Five years of thwarted efforts to negotiate a friendly deal with Osisko Mining Corp. pushed Vancouver-based Goldcorp Inc. to launch a hostile $2.6-billion bid for its smaller rival this week.
According to Goldcorp’s formal bid filings on Tuesday, the miner describes how Montreal-based Osisko repeatedly rejected offers to merge and refused to provide key information after the companies signed a confidentiality agreement in the summer of 2008.
Calls to Osisko requesting comment were not returned.
Goldcorp chief executive Chuck Jeannes has wanted to get his hands on Osisko’s giant Canadian Malartic mine in Quebec since 2008, when he was in charge of finding new projects as Goldcorp’s executive vice-president of corporate development.
In September of 2008, both Goldcorp and Osisko’s shares were volatile amid fallout from the U.S. housing crisis.
Osisko, whose stock dropped as low as $1.86 a share, asked Goldcorp whether it would buy a small stake in the miner.
The much bigger Goldcorp, which was trading above $30 a share, agreed and a month later started talking to Osisko about acquiring the rest of the miner’s shares. But after Goldcorp presented Osisko with an offer letter in November, Osisko said no.
That was the first of many rejections for the Vancouver-based mining company.
Over five years, Goldcorp tried to pursue a merger with Osisko while it was developing its Canadian Malartic project.
The mine, which contains 10.1 million ounces of gold reserves, poured its first gold in April of 2011 and is now in commercial production. It is expected to produce more than 500,000 ounces a year over the mine’s 16-year life and is currently one of Canada’s largest gold mines.
By the end of 2009, Goldcorp had made three merger offers to Osisko’s management, which were all rejected.
(Osisko’s stock was trading above $7.50 a share when Goldcorp made its offer in 2009. Goldcorp is now offering a total of $5.95 in cash and stock for every Osisko share.)
The Quebec miner cancelled a meeting and would not provide information as per their agreement, according to Goldcorp’s filings. In 2012, Osisko asked Goldcorp to “re-engage with Osisko with the intention of completing a transaction.”
But after the companies entered into a new confidentiality agreement, Osisko refused to provide Goldcorp with information.
The companies’ on-again, off-again relationship culminated in September 2013 when Osisko’s chief executive told Goldcorp that his company was supportive of pursuing a corporate transaction and would give Goldcorp access to all the relevant information.
The data Goldcorp requested was never provided and in November Osisko said its board of directors had decided not to proceed with merger discussions, according to the filings. Goldcorp called it five years of “frustrated attempts” to engage with Osisko.
On Monday, Goldcorp bypassed Osisko’s board and made its offer directly to Osisko’s shareholders.
Goldcorp’s offer represents a 15-per-cent premium based on the companies’ closing prices last Friday. A number of analysts believe Goldcorp has to sweeten its offer. Osisko’s stock is up 20 per cent to $6.23 on the expectation of a higher bid.
Osisko has said it is considering the offer.