Goldcorp agrees to buy Andean Resources for $3.42B, topping rival bid from Eldorado

Goldcorp to buy Andean Resources for $3.42B

TORONTO — Canada’s Goldcorp Inc. said Friday it has agreed to buy Andean Resources Ltd. for about 3.6 billion Canadian dollars (US$3.42 billion), trumping a rival bid from Eldorado Gold Corp.

The acquisition would give Goldcorp, the world’s second-largest gold producer by market capitalization, access to Andean’s Cerro Negro gold project in Argentina, which is said to have a significant amount of gold and silver.

The Goldcorp-Andean deal has been approved by both companies’ boards but requires approval by a majority of Andean shareholders. The companies expect the deal to close later this year or in early 2011.

The announcement came shortly after Canada’s Eldorado made an offer of 3.4 billion Canadian dollars (US$3.2 billion) for the company.

Andean is based in Utah and is listed on the Toronto and Australian stock markets. It acquired the Cerro Negro gold deposit in southern Argentina in 2004.

Chuck Jeannes, Goldcorp’s president and CEO, said the deal represents a 34 percent premium to Andean’s closing price Thursday.

Wayne Hubert, Andean’s CEO, said the Goldcorp deal benefits both companies and allows for the development of Cerro Negro into a key gold project.

He said the board unanimously concluded the timing was right for Goldcorp “to take up the baton at this point and develop an exceptional project into a world class mine we know it will become.”

Under terms of the Goldcorp deal, each Andean common share will be exchanged for 0.14 Goldcorp shares or a cash payment in the amount of 6.50 Canadian dollars ($6.17) per share.

The maximum cash consideration will be 1 billion Canadian dollars ($948.6 million).

Shareholders can choose stock, cash or a combination of the two.

Steven Green of TD Securities said Goldcorp’s offer looks expensive based on recent transactions but likely reflects the high-grade nature of the deposit and the presence of at least two bidders.

Goldcorp’s U.S. shares fell 96 cents, or 2.2 percent, to $42.84 Friday.

Moody’s Investors Service on Friday affirmed its foreign currency issuer rating on Goldcorp, expressing confidence in the company’s ability to handle the deal.

Moody’s said Goldcorp’s earnings and operating cash flow were tracking strongly through June 30, with expectations of a comparable profile for the second half of the year.

“Goldcorp’s stable outlook reflects Moody’s expectation that the company will continue to generate good operating cash flows, prudently manage its investment decisions relative to anticipated levels of cash flow, and maintain a conservative capital structure and healthy liquidity position,” it said.

Paul Wright, president and CEO of Eldorado, said Eldorado had been looking at buying Andean for the past two years and had taken its offer to shareholders after the companies failed to reach an agreement.

Wright said it has not yet received any response to its latest proposal, which was submitted on Monday. A proposal submitted earlier in the month had been rejected by Andean’s board.

“We believe an Andean combination with Eldorado will offer investors the single best golden investment vehicle on the planet,” he told analysts on a conference call.

He said they remain serious bidders and they’ll keep their options open.

“I think you can assume that we will use whatever tools that we have available to us as we see fit,” Wright said.

Earlier this year, Goldcorp also beat out Barrick Gold Corp., the world’s largest gold producer, when it bought a controlling interest in the El Morro gold-copper project in Chile from junior miner New Gold Inc.

Andean’s Cerro Negro gold project has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver.

“It all boils down to the fact that Cerro Negro is a truly exceptional asset by any reckoning. And these types of high-quality gold projects have become exceedingly rare,” Jeannes said.

Jeannes said that the project allows Goldcorp to increase its gold resources by expanding existing deposits and exploring more areas that may have additional deposits.

If the transaction doesn’t close, Andean will pay Goldcorp a termination fee equal to 1 percent of the aggregate total offer made by Goldcorp.