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*** Mine merger rattled by competing bids ***


Mine merger rattled by competing bids

Coeur woos Wheaton, Golden Star goes for Iamgold

By Myra P. Saefong, CBS.MarketWatch.com
4:58 PM ET May 28, 2004

SAN FRANCISCO (CBS.MW) -- Shares of Coeur d'Alene Mines fell as much as 10 percent and Golden Star Resources' stock closed at its lowest level in a week Friday after the companies made separate moves to shake up a merger deal between Wheaton River and Iamgold.

Coeur's stock fell as low as $4.60 before recovering a bit to close at $4.69, down 37 cents, or 7.3 percent. Golden Star's shares fell 34 cents, or 6.4 percent, to close at $4.97.

Takeover targets Wheaton River (WHT: news, chart, profile) (CA:WRM: news, chart, profile) and Iamgold (IAG: news, chart, profile) (CA:IMG: news, chart, profile) closed mixed. Wheaton's stock closed down a penny, or 0.3 percent, at $2.91, while Iamgold shares tacked on 21 cents, or 3.9 percent, to end the session at $5.64.

"I've never seen simultaneous unsolicited bids for both an acquirer and a target who are already in an existing deal," said Paul Glazer, president of Glazer Capital Management, a hedge fund based in New York. "And it seems to be a coordinated attack." (Glazer has positions in Wheaton, Iamgold and Golden Star, but none in Coeur.)

While confusing, the "mess of mergers in the gold mining shares ... shows the level of interest in this market and will continue to do so as the gold price strengthens," observed Kevin Kerr, editor of Kwest Market Edge. See the newsletter.

"Companies obviously see massive value long-term to make these deals," he added.

Mixing metals

Coeur d'Alene announced a cash, stock and debt offer late Thursday valued at $1.8 billion to buy Wheaton River.

But the deal would be subject to the termination of an existing merger agreement between Wheaton and Iamgold, Coeur d'Alene said.

The boards for Wheaton and Iamgold approved an agreement in March for Iamgold to buy Wheaton in an all-stock arrangement. The deal calls for Iamgold to get one Wheaton share for every 0.55 share of the company. The New York Times valued the transaction at around $2.2 billion. Shareholders are scheduled to vote on it June 8.

Glazer expects Wheaton to vote in favor of the Iamgold offer at the shareholders' meeting. On the other hand, Iamgold's decision is a bit harder to call, he said, adding that its board will have to rally its investors to support the merger.

Representatives from Wheaton and Iamgold didn't immediately return calls requesting comment.

Adding to the mix is Golden Star Resources (GSS: news, chart, profile) (CA:GSC: news, chart, profile), which said late Thursday that it's offered to buy Iamgold through a share-for-share deal.

Golden Star said it would give 1.15 common shares for each Iamgold common share -- a premium of 13 percent to Iamgold shareholders, based on Thursday's closing prices for the stocks on the Toronto Stock Exchange. The deal's value, based on the Thursday's TSE closing prices, is about $883 million (or $1.21 billion Canadian).

Golden Star said in a statement it has an agreement with Coeur d'Alene, whereby Coeur will pay Golden Star $26 million if both Golden Star's deal for Iamgold, and Coeur d'Alene's offer for Wheaton succeed.

Coeur goes for silver

Coeur's offer for Vancouver-based Wheaton , which equates to around $3.28 per share, includes $1.9 billion in equity and $133 million in assumed debt, less $174 million in cash, according to Idaho-based Coeur d'Alene (CDE: news, chart, profile).

That's a 14 percent premium to Wheaton's Thursday closing price and a 25 percent premium over its 20-day average, calculated Coeur d'Alene.

If all of Wheaton's shareholders chose the cash option, the maximum cash consideration will be $205 million ($285 million Canadian), or 37 cents (50 cents Canadian) per Wheaton share, Coeur added.

"Our combination creates the fourth-largest North American precious metals company, increases Coeur d'Alene's primary silver production by 45 percent and creates a top 10 global gold producer with among the lowest cash costs of production in the industry," said Dennis Wheeler, Coeur's chief executive, in a statement.

Wheeler made the proposal on behalf of Coeur d'Alene in a letter sent to Wheaton chief Ian Telfer on Thursday.

If it succeeded in its bid for Wheaton, Coeur would expand its silver production by nearly 50 percent, but it would also become a "proportionately larger gold producer, as well as a copper producer," wrote Pierre Vaillancourt, an analyst at Orion Securities, in a note to clients.

At the same time, the match seems "odd,", he said. "Coeur and Wheaton River ... would join to increase the new company's dominance as a silver producer, but the new company would have a broad collection of assets."

The premium on the offer is "inconsistent with current market valuation for Coeur and Wheaton," Vaillancourt added.

He noted that he wouldn't be surprised to see other potential bidders emerge. "Given the premium value of Wheaton to Coeur, we believe Coeur will have to sweeten its bid to win the day," he wrote.

Golden Star's bid a 'fair value'

Merrill Lynch analyst Michael Jalonen said Golden Star Resources would be paying "fair value" for Iamgold if its offer were to be accepted.

The total acquisition cost would be about $395 per gold ounce -- and that's "essentially in line to the prevailing gold price," he observed.

But recent transactions in the sector have been completed at premiums to the gold price, he added. So this may "not be the final price offered for Iamgold."

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

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