Yamana Gold To Acquire 50% Stake In Osisko Assets For C$929.6 Mln

(RTTNews) - Yamana Gold Inc. (AUY, YRI.TO) and Osisko Mining Corp. (OSK.TO) entered into an agreement by which Yamana will acquire a 50% interest in Osisko's mining and exploration assets for C$441.5 million in cash and 95.7 million common shares of Yamana having an aggregate value of C$929.6 million, Yamana Gold said.

Osisko's board of directors has unanimously determined that the Arrangement is in the best interests of Osisko and its shareholders and will recommend that Osisko shareholders vote in favour of the Arrangement.

Upon implementation of the Agreement, each outstanding Common share of Osisko will be exchanged for C$2.194 in cash, 0.2119 of a Yamana common share, and a new common share of Osisko.

The value of the interest in the Yamana share is C$2.06, which is based on the closing price of the Yamana shares on the Toronto Stock Exchange as of April 1st, 2014, and the ascribed value of the new common share of Osisko is C$3.35, for an aggregate of cash and the implied share value equal to C$7.60 for each currently outstanding Common share of Osisko.

As per the Agreement, Yamana will become an equal partner in all of Osisko's mining and exploration assets. Osisko will continue to operate the Canadian Malartic Mine and all other projects under the guidance of a joint operating committee, and will also maintain its head office in Montreal.

Osisko shareholders will receive, in exchange for their common shares a combination of cash, Yamana common shares, and new common share of Osisko, which collectively have an aggregate implied value of C$7.60 for each outstanding Osisko common share.

As per the terms of the Arrangement, Osisko will transfer all of its rights, titles and interests in its mining assets, including the Canadian Malartic Mine and its advanced and greenfield exploration properties to one or more general partnerships . Yamana will then acquire a 50% interest in the units of each of the General Partnerships in exchange for the Yamana Consideration.

The aggregate value of C$7.60 per Common share represents a premium of about 10% over Osisko's closing price as of April 1st, 2014, and 22% to the Goldcorp (GG, G.TO) offer of C$6.21, which is based on the closing price of the Goldcorp common shares on April 1st, 2014.

Osisko retains an additional 2% royalty on all General Partnership projects other than Canadian Malartic.

Osisko has also entered into binding commitment agreements with CPPIB Credit Investments Inc., a wholly-owned subsidiary of CPP Investment Board for an increase under its existing credit facility and with La Caisse de depot et placement du Quebec for the sale of a gold stream on the Canadian Malartic Mine.

The Gold Stream Agreement and the increase in the Credit Facility provide additional funding to Osisko of an aggregate of C$550 million. Together with cash consideration from Yamana, these investments generate about C$1 billion in cash to be distributed to Osisko shareholders.

The Canadian Malartic General Partnership will enter into the Gold Stream Agreement related to 37,500 ounces of gold per annum with La Caisse in return for a deposit of C$275 million. The Gold Stream Agreement includes a repurchase and put clause and provides La Caisse with a guaranted minimum return of 8% (in the event the put right is exercised).

The Gold Stream Agreement has a transfer price of 42% of the spot gold price. Osisko's CPPIB credit facility of C$150 million will be transferred to the Canadian Malartic General Partnership and increased by C$275 million, with an interest rate of 7.625%, providing a total of C$425 million of debt to finance the transaction.

CPPIB, a lender to and security holder of Osisko, is supporting the transaction by making a binding commitment to advance a C$275 million loan and to roll over its existing C$150 million loan, providing a total of C$425 million of debt to finance the transaction.

In connection with the transaction, La Caisse and Investissement Quebec will each exercise their right to convert their respective C$37.5 million debentures into six million shares of Osisko (12 million shares total) prior to the implementation of the Agreement.

The Arrangement will be carried out by way of a statutory plan of arrangement pursuant to the Canada Business Corporations Act and must be approved by the Superior Court of Quebec and the affirmative vote of Osisko's shareholders and optionholders voting together at a special meeting to be held by Osisko not later than May 20th, 2014. At the special meeting, the Arrangement will require approval of Osisko shareholders and optionholders voting together holding at least 66 2/3% of the common shares, voting in person or by proxy.

In addition to securityholder approval, the closing of the Arrangement is subject to a number of conditions, including the execution of definitive documentation in respect of the Gold Stream and the CPPIB Credit Facility and the receipt of court and all necessary regulatory or exchange approvals. The Arrangement is not subject to due diligence, or Yamana shareholder approval, and is supported by committed financing.

The Arrangement is expected to close by May 30th, 2014, following receipt of all shareholder and court, regulatory and exchange approvals.

As per the terms of the Arrangement, Osisko is subject to customary non-solicitation covenants. In the event a superior proposal is made to Osisko, Yamana has a 5 business day right to match such proposal, and under certain circumstances in the event Osisko's board of directors changes its recommendation or terminates the Arrangement, Osisko has agreed to pay termination fees totaling C$70 million.

In certain other circumstances where the transaction is not completed, Osisko has agreed to reimburse Yamana's expenses in the amount of C$10 million for its costs.