Osisko Mining finds white knight in stock-and-cash deal with Yamana Gold

MONTREAL - Osisko Mining Corp. (TSX:OSK), which has been fighting a hostile takeover attempt by Goldcorp (TSX:G), has struck a friendly deal with Yamana Gold Inc. (TSX:YRI) and two of Canada's largest pension funds that values the company at about $3.4 billion.

The deal will see Yamana acquire a 50 per cent stake in Osisko's mining and exploration assets including the gold miner's flagship Canadian Malartic mine in Quebec.

Osisko chief executive Sean Roosen said the Yamana deal gives shareholders the ability to benefit from growth at Canadian Malartic as well as its other projects in development.

"We have worked carefully and diligently over the past two months to bring this deal to shareholders," Roosen said in a statement.

"Osisko will continue to follow its ideals and principles, with our primary objective being to maximize shareholder value as we work to grow the free cash flow from our assets and return benefits to Osisko's owners through the planned implementation in 2014 of a significant dividend program."

Under the deal, Osisko shareholders will receive $2.194 in cash, 0.2119 of a Yamana share and a new share of Osisko, which will continue to hold a 50 per cent stake in its assets. The company valued the offer at $7.60 per share based on a value of $3.35 for the share in the new Osisko.

Only about half of the cash will come directly from Yamana. The rest will come from the CPP Investment Board and the Caisse de depot et placement du Quebec.

The deal will require approval by a two-thirds majority vote by Osisko shareholders and optionholders to be held by May 20.

Goldcorp has offered Osisko shareholders 0.146 of a Goldcorp share plus $2.26 in cash for each Osisko share, a deal worth about $6.21 per share as of Tuesday.

Under an agreement with Osisko, Goldcorp has been granted access to Osisko's confidential information to assess before making its next move. The senior gold miner must now decide if it wants to raise its offer or walk away from the bid, which is open until Friday at 5 p.m. ET.

Goldcorp said Wednesday it would need time to evaluate the new offer and would "provide comments in due course."

If Osisko receives a bid topping the Yamana deal, Yamana has the right to match the offer and under certain circumstances receive a $70-million break fee.

Yamana chairman and chief executive Peter Marrone said the deal gives his Toronto-based company entry into a world-class North American jurisdiction with low-cost production.

Yamana's current operations are all in South America and Mexico.

"This approach provides the best available opportunity for Yamana to gain access and exposure to a high quality asset with the least risk balanced with immediate growth and the potential for further value enhancement," Marrone said in a statement.

The deal announced Wednesday will see Yamana pay $441.5 million in cash and 95.7 million in shares for the 50 per cent stake in the partnership that will hold the Osisko assets.

Osisko also said the partnership has signed a deal with the CPP Investment Board to increase its existing credit facility by $275 million and sold a gold stream of 37,500 ounces per year from Canadian Malartic to the Caisse de depot et placement du Quebec for $275 million that will be used to pay shareholders.

Osisko shares closed up 47 cents at $7.35 on the Toronto Stock Exchange, while Yamana shares closed down 23 cents at $9.48. Goldcorp shares gained 53 cents to finish at $27.61.