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September 3, 2010 1:17 PM

Seven Firms On Canadian-Australian Mining Deal

Posted by Zach Lowe

As we brace for Hurricane Earl and Labor Day weekend travel hell, lawyers in Canada and Australia are working away on the latest big deal in the mining industry: The move by the Canadian company Goldcorp to scoop up its Australian rival, Andean Resources, for $3.4 billion in a cash-and-stock deal. 

The deal has provided work for a whopping seven law firms (transnational deals are the best!), including two representing an as-now jilted bidder that might come back with a higher offer for Andean. For now, though, that bidder--Vancouver-based Eldorado Gold--is left about 2 percent short of the Goldcorp offer and must proceed with the knowledge that Andean's board already has backed the Goldcorp proposal, according to The New York Times

The Canadian firm Fraser Milner Casgrain is advising Andean, a longtime firm client, along with the Australian firm Corrs Chambers Westgarth, according to lawyers on the deal. Fraser has done work for Andean since its stock was trading for pennies in Australia, according to Sander Grieve, the lead Fraser partner on the deal. The Fraser Milner team included partners John Sabine and Linda Misetich. They were assistedby Andean inhouse counsel John Thomas.

Goldcorp turned to its longtime counsel at Cassels Brock & Blackwell, which has represented the company since it, too, was a penny stock, according to Jeffrey Roy, the lead Cassels partner on the Andean deal. Partner Joan Beck also worked on the matter.  Mallesons Stephen Jacques's Nigel Hunt is providing Australian counsel. 

Cassels and Fraser were also on opposite sides of Goldcorp's acquisition of Gold Eagle Mines in 2008, according to Roy and Grieve, and the structure of that deal informed the Goldcorp-Andean deal announced today. Both deals involved a cash-and-stock structure in which target shareholders must elect to receive a combination of cash and stock--in the Andean case, $6.50 (Canadian) in cash and 0.14 shares of Goldcorp stock for each Andean share they own, the NYT says. Shareholders who do not make that election will be treated as if they have chosen to receive all shares and no cash, Roy says. The deal is structured so that Goldcorp will pay no more than $1 billion in cash. If the $1 billion isn't enough to cover the number of shareholders who request the cash-and-stock combination, each shareholder will receive a prorated amount of cash, the lawyers say. 

The floating cash-and-stock structure is designed to give certainty to both the buyer and shareholders on both sides of the deal, the lawyers say. Goldcorp knows precisely how much cash it will have to spend, while its shareholders know that their shares won't be diluted as much as they might be in an all-stock deal. 

A couple of other interesting nuggets: The breakup fee is minimal by North American standards, the lawyers say. If it nixes the deal, Andean will have to pay Goldcorp 1 percent of the purchase price. Standard breakup fees in the U.S. and Canada come in around 3 percent, and Goldcorp pushed for a more North American-style deal with stronger protections, Roy says. But Australian deal rules have what Roy described as "looser" deal protections, including a strict cap on breakup fees. That makes Australian deals more "interloper-friendly," Roy says, meaning Andean might feel more comfortable talking to suitors than would an American or Canadian target in the same position. 

Fasken Martineau Dumoulin is serving as lead Canadian counsel to Eldorado, according to a company statement and lawyers working on the deal. The Australian Freehills and Dorsey & Whitney are also providing counsel to Eldorado. Lawyers at Fasken did not immediately return calls seeking comment. 

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