Equinox circles in on Lundin Mining after Inmet merger deal falls apart

Wednesday, March 30 2011 @ 07:06 PM UTC

Contributed by: Don Winner

By: Craig Wong, The Canadian Press - Equinox Minerals Ltd. pitched its hostile takeover bid with renewed vigour Wednesday after Lundin Mining's planned merger with Inmet Mining fell apart. Equinox said its $4.8-billion cash and stock offer, which has been rejected by the Lundin board as inadequate, "remains the clear and compelling choice for Lundin shareholders." "It provides them with the flexibility to receive significant value in cash now or to benefit over the long term by participating in the potential of a leading pure-play copper company with a portfolio of world-class assets and a strong growth profile," Equinox president and chief executive Craig Williams said. Shares of Lundin traded up about six per cent after the company agreed to call off its merger with Inmet. The company, which has repeatedly called the Equinox offer too low, has said it would launch a new search for alternatives to "improve shareholder value."

The merger had been in doubt since Lundin became the takeover target of a third Canadian mining company and questions arose about the future of an Inmet copper project in Panama. The failure to consummate the merger with Inmet is the second time Lundin has not been able to close a major deal in recent years. A proposal that would have seen Lundin acquired by HudBay Minerals fell apart in 2009 after it was opposed by HudBay shareholders because it would have significantly diluted the company's stock. Meanwhile, investment firm UBS suggested Wednesday there was a 40 per cent chance that Lundin would attract multiple takeover offers. "Lundin did not appear to have conducted a thorough auction prior to committing to the merger-of-equals proposal with Inmet in January," UBS analyst Onno Rutten wrote in a note to clients. Rutten raised his target price on Lundin from $8.20 to $8.90 and maintained a "buy" rating on the stock. To aid in its search for another bidder, Lundin has adopted a shareholder rights plan to defend against hostile takeover offers. The plan could see Lundin double its number of outstanding shares, making an unsolicited takeover offer prohibitively expensive. Lundin has operations in Portugal, Spain and Sweden, producing copper, nickel, lead and zinc as well as an equity stake in the Tenke Fungurume copper-cobalt project in the Democratic Republic of Congo. Equinox has offered $8.10 per Lundin share in cash or 1.2903 Equinox shares plus a penny for each share. The amount of cash is limited to $2.4 billion, while the number of shares offered is capped at 380 million. Lundin shares were up 40 cents at $7.99 Wednesday afternoon on the Toronto Stock Exchange, while Inmet shares were up $3.35 at $65.80. Equinox shares were up 14 cents at $5.62.

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