Goldcorp just agreed to buy Glamis Gold for $8.6 billion in stock to create what will be one of the world's largest gold producers. According to the deal Glamis shareholders will get 1.69 shares of Goldcorp for each Glamis shares. The offer values Glamis at $51.49, for a 33% premium to yesterday's closing price.

Ian Telfer, the CEO of Goldcorp will move over to become chairman of Goldcorp while Kevin McArthur, the president and CEO of Glamis will now wear both of these hats for the company.

The new Goldcorp will become one of the largest gold companies in the world and will produce over 2.5 million ounces of gold next year.

This is a surprise announcement to me. We all knew more consolidation was going to happen in the gold industry, but we didn't know something this big was going to happen today. This year we've seen Falconbridge get sucked up by Xstrata, Desert Sun Mining by Yamana Gold, the Novagold takeover attempt by Barrick, and attempts to buy Inco by Teck Cominco and Phelps Dodge. More mergers are on the way. But this is a big one folks.

I have positions in both companies and, although I usually sell out when a company gets bought out, with gold stocks on the verge of breaking out I'm going to hold on to both for now.