Another Gold Miner Joins the Bidding Drama

Yamana Gold and Agnico-Eagle Mines make an impulsive move to acquire Osisko Mining.

Apr 16, 2014 at 5:04PM

Sometimes reading corporate news can be more interesting than reading an exciting thriller. This is surely the case with the bid war currently under way for Osisko Mining. When Goldcorp (NYSE:GG) increased its offer for Osisko Mining by 28.5% in order to top Yamana Gold's (NYSE:AUY) proposal, I thought that the story was close to an end. At that time, I believed there were two ways the story might end: Either Goldcorp would win the battle or Osisko Mining would find a way to push Yamana Gold's offer, which it clearly favored.

I didn't believe that any player would increase its bid again, as I considered Goldcorp's offer already too high. That's why the announcement of a friendly acquisition agreement of Osisko Mining by Yamana Gold and Agnico-Eagle Mines (NYSE:AEM) was a great surprise. Agnico-Eagle Mines and Yamana Gold have now announced that they're acquiring Osisko Mining for a total consideration of approximately C$3.9 billion, an 11% premium to Goldcorp's current bid. Will this spectacular story continue?

Another bid would be irrational
Although the Osisko story has been full of twists and turns, there's little chance that we'll see another act of this drama. A higher bid would be truly irrational. It is unlikely that Goldcorp will turn a business acquisition story into a gambling house story. Lifting the offer by another 10% from the existing Yamana Gold and Agnico-Eagle Mines proposal would make Goldcorp's bid 50% higher than its initial offer. Notably, Goldcorp's first offer made back in January already represented a 28% premium over the 20-day volume-weighted average share price of Osisko Mining.

Dubious move from Yamana Gold and Agnico-Eagle Mines
In my view, Yamana Gold and Agnico-Eagle Mines are overpaying for Osisko Mining. The stock market thinks the same, as shares of both miners were deep in the red on the day of the acquisition announcement. Osisko Mining's shares had become overvalued following the bidding fury. Buying an asset whose price has increased so rapidly in the past few months when gold stubbornly trades around $1,300 per ounce could not be considered a wise strategy.

Yamana Gold's and Agnico-Eagle Mines' offer consists of C$1 billion in cash, C$2.3 billion in Yamana Gold and Agnico-Eagle shares, and shares of a new company, Spinco, worth approximately C$575 million. This offer will lead to dilution for shareholders of both miners. At the same time, Goldcorp's shareholders should be happy, as the company will likely drop the hunt for the overvalued Osisko Mining. I think that if Goldcorp decides to stay in the game and makes another bid, it will be a big negative for the company's valuation.

Bottom line
The only real winners in this story are Osisko Mining shareholders -- their stock rallied 66% this year. I don't think that shareholders of Agnico-Eagle Mines and Yamana Gold could be satisfied with the news. They will experience a significant dilution in exchange for a mine that is able to produce 500,000-600,000 ounces of gold annually over a 16-year mine life.

In addition, the debt levels of both companies will increase, as Agnico-Eagle Mines had just $170 million of cash at the end of the fourth quarter, and Yamana Gold possessed $220 million of cash at the end of the fourth quarter. In order to maintain a sufficient cash cushion, both companies will have to raise $350 million-$400 million in additional debt.

All in all, it looks like Yamana Gold and Agnico-Eagle Mines just made an impulsive move.

Boost your 2014 returns with The Motley Fool's top stock
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers