The Deal: Osisko Rejects Goldcorp Bid, Threatens Poison Pill

NEW YORK (TheStreet) -- Canadian gold producer Osisko Mining Corp. has rejected Goldcorp Inc.'s C$2.6 billion ($2.4 billion) bid, and warned it may use a poison pill defense to find an alternative to an offer the company labeled as hostile. Goldcorp shares were rising 1.1% to $23.43.

"Goldcorp's offer significantly undervalues Osisko's world-class Canadian Malartic mine, and the rest of the company's portfolio of high-potential projects in North America," Montreal-based Osisko said. "The premium offered by Goldcorp, as well as the transaction multiples implied by the offer, are both significantly below the relevant precedents."

Osisko indicated its opposition to the bid as early as Jan. 15, when Goldcorp unveiled its unsolicited offer of 0.146 of a share and C$2.26 in cash for each Osisko share. The offer represented a 15% premium to Osisko's closing price the day before the bid, but quickly slipped to a discount as investors bid up the target in expectation of an improved offer.

Goldcorp wants control of Osisko's Malartic gold mine in Quebec, which has proven and probable reserves of 10.1 million ounces of gold. The mine produced 475,277 ounces of gold in 2013 at an average cost of C$760 per ounce.

Osisko said it expects output from the mine to increase and costs to fall in the coming years. Goldcorp's offer was " opportunistically timed to occur before Canadian Malartic enters what Osisko expects will be its most productive years," the target said.

Goldcorp is one of a handful of large gold miners that has the financial strength to take advantage of depressed gold prices that have hit the valuations of many producers. Osisko shares were down 36% over the twelve months prior to Goldcorp's bid.

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