First Quantum raises Inmet Mining bid to $5.18B
First Quantum Minerals Ltd., a producer of copper in Africa, raised its bid for Inmet Mining Corp. for a second time to about C$5.1 billion ($5.18 billion) as it seeks to gain control of the Cobre Panama project.
It's offering C$72 in a mixture of stock and cash for each Inmet share, Vancouver-based First Quantum said in a statement today. That's 36 percent more than Inmet's closing share price on Nov. 27, the day before the company announced that it had rejected two earlier, unsolicited offers from First Quantum. The latest bid is also 2.9 percent more than the prior offer of C$70 a share.
"I don't see how two dollars gets them over the hurdle," John Goldsmith, deputy head of equities at Montrusco Bolton Investments Inc. in Toronto, which manages C$5.2 billion including First Quantum shares, said Sunday by telephone. "The thinking originally was that this could go as high as C$75 to C$80. Is this going to be a series of little increases?"
First Quantum said the deal would create a company capable of becoming one of the world's top-five copper producers within five years. Copper prices have more than quadrupled in the past 10 years as demand at times outpaced supply. Cobre Panama is the second-largest undeveloped copper deposit, according to data compiled by Bloomberg, and Toronto-based Inmet plans to spend $6.2 billion developing the mine to produce an average of 266,000 tons a year of the metal.
In addition to its project in Panama, Inmet operates mines in Finland, Spain and Turkey. Leucadia National Corp., based in New York, owns 16 percent of Inmet and Temasek Holdings Pte Ltd., Singapore's state investment company, has 11 percent, according to data compiled by Bloomberg.
First Quantum said Sunday that after the disclosure of its initial bid, it was approached by some "key" Inmet shareholders who would support talks between the two companies.
"Our clear preference remains to engage with Inmet," First Quantum Chairman and Chief Executive Officer Philip Pascall said in the statement.
Flora Wood, a spokeswoman for Inmet, didn't immediately respond to a request for comment. Inmet closed at C$69.83 in Toronto on Dec. 14.
Goldman Sachs Group Inc., Jefferies Group Inc. and RBC Capital Markets are advising First Quantum, which would fund about 50 percent of the deal in shares and about 50 percent in cash. First Quantum said it will use existing cash and is arranging a $2.5 billion credit facility.
The deal is the third-largest mining company takeover announced this year, after Glencore International Plc's bid for Xstrata Plc and Sesa Goa Ltd.'s offer for Sterlite Industries India Ltd., according to data compiled by Bloomberg.
In 2009, the Congolese government stripped First Quantum of rights to the Kolwezi copper project. London-based Eurasian Natural Resources Corp. bought rights to Kolwezi the following year and First Quantum began legal action against ENRC. The dispute was settled in January when ENRC agreed to pay First Quantum $1.25 billion for First Quantum's share of the Kolwezi and two other Congolese assets.
First Quantum is the world's 13th-biggest copper producer and predicts it will become the sixth-biggest in 2016, it said in a February presentation.