NEW YORK (TheStreet) -- A day after announcing it would make a hostile bid for Osisko Mining, Goldcorp (GG - Get Report) has made its intentions official. On Tuesday, the gold producer confirmed it had commenced its formal offer to acquire Osisko Mining Corporation by filing required documents with Canadian securities regulators and the U.S. Securities and Exchange Commission.
Goldcorp intends to purchase all outstanding common shares in a cash-and-shares deal worth C$2.6 billion. As part of the offer, Osisko shareholders will receive 0.146 of a Goldcorp share and C$2.26 in cash per holding. The offer to Osisko shareholders is equal to approximately $5.95 a share, 28% higher than the company's 20-day volume-weighted average share price.
The Vancouver-based Goldcorp said the unsolicited offer was in line with its strategy of portfolio enhancement, particularly its focus on investing in low political risk jurisdictions. Of particular interest is the acquisition of the Abitibi mining district in Quebec, a proven high-quality operation.
"Goldcorp shareholders will benefit from a long-lived, high-quality gold mine with low all-in sustaining costs capable of generating long-term free cash flows," said Goldcorp CEO Chuck Jeannes in a statement on Monday. "With our world-class Eleonore project in Northern Quebec due to commence production later this year, Goldcorp will be the largest gold producer in the province with the resources to continue building collaborative, long-term relationships while leveraging corporate and regional synergies."
In an SEC filing, Goldcorp said Osisko has refused to entertain merger or acquisition talks over the last five years.
"The Offeror has made repeated and genuine attempts to discuss a mutually beneficial transaction with Osisko. Osisko has continually refused to either negotiate or engage in meaningful dialogue, leading to the current circumstances where the Offeror believes the Offer made by this Offer and Circular is the only way to deliver the expected benefits of a transaction to all Osisko Shareholders," the company said in the filing.
On Tuesday, Goldcorp shares slid 2.5% to $22.48, adding to 3% in losses sustained since news broke Monday.
Of possible concern to investors, Canadian miners have suffered over the past year as the price of gold slumped approximately 25%. The takeover bid will mark the Canadian gold industry's first in almost a year as companies opted to focus on cutting costs and navigating choppy waters.
TheStreet Ratings team rates GOLDCORP INC as a Hold with a ratings score of C-. The team has this to say about their recommendation:
"We rate GOLDCORP INC (GG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GG's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- 42.73% is the gross profit margin for GOLDCORP INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, GG's net profit margin of 0.53% is significantly lower than the industry average.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GOLDCORP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Net operating cash flow has decreased to $274.00 million or 36.86% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: GG Ratings Report