Agnico Eagle Slides on Osisko Takeover Deal - Analyst Blog

Agnico Eagle Mines Ltd. AEM has entered into an agreement with Yamana Gold Inc. AUY and Osisko Mining Corporation, under which, Agnico Eagle and Yamana will jointly acquire 100% of Osisko's issued and outstanding common shares. Shares of Agnico Eagle fell around 8.8% in the trading session following the deal announcement.

Both the companies agreed to acquire Osisko for a total consideration of about C$3.9 billion ($3.5 billion) or C$8.15 ($7.42) per share. The purchase price represents an 11% premium to the current implied value of Goldcorp Inc.'s GG recently announced revised bid for Osisko.

The offer consists of roughly C$1 billion in cash, around C$2.33 billion in Agnico Eagle and Yamana shares, and shares of a new company ("Spinco") with an implied value of roughly C$575 million.

Per the agreement, Agnico Eagle and Yamana will each own 50% of Osisko, and set up a joint committee to operate the Canadian Malartic Mine in Quebec. Once the transaction is complete, Osisko shareholders will own roughly 16.7% of Agnico Eagle and around 14.4% of Yamana. As part of the agreement, certain assets of Osisko will be transferred to Spinco, the shares of which will be distributed to Osisko shareholders.

The agreement is a strategic fit for both Agnico Eagle and Yamana. The acquisition is expected to be accretive to Agnico Eagle and will also improve its total cash cost and all-in sustaining cost profiles. The company will also get access to Canadian Malartic, the largest producing gold mine in Canada which has the potential to produce an average of roughly 600,000 gold ounces per year for 14 years. Agnico Eagle will also optimze the Canadian Malartic Mine plan.

Agnico Eagle will be able to manage its additional debt from the acquisition due to strong cash flow generation from a larger business. The company expects synergies from its other Abitibi operations. Moreover, the advanced Kirkland Lake project will enrich the company's portfolio.

Agnico Eagle currently retains a Zacks Rank #3 (Hold).

AngloGold Ashanti Ltd. AU, which also belongs to the gold mining industry, retains a Zacks Rank #1 (Strong Buy).