TORONTO – There is another merger on the horizon, one that has stirred up a fair amount of animosity but none of the headlines of the failed Barrick-Newmont talks. This one is the hostile takeover of Augusta Resource Corp. by Hudbay Minerals.
In February this year Hudbay announced its intention to buy up the common shares of Augusta Resource in a deal that valued the smaller company at $540 million. Augusta’s flagship project is it Rosemont copper-molybdenum-silver mine under development near Tucson, AZ.
Hudbay views the Rosemont project as a low cost, long life mine, and one that would add positively to Hudbay’s bottom line.
No thanks, said the Augusta management, calling Hudbay’s offer “grossly inadequate” and “opportunistic.”
And the two companies have been circling warily for the past two months, their opposing viewpoints generating much verbiage and various legal fees as they air their differences.
The Hudbay-Augusta dispute went before the British Columbia Securities Commission concerning Augusta’s shareholder rights plan. Yet the two companies are unable to agree even on what the BCSC ordered last week. Each has issued a news release with differing interpretations of the finer points of Augusta’s rights plan.
Hudbay said: “In its decision, a panel of the Commission unanimously determined that, unless Augusta has confirmed that it has terminated its shareholder rights plan, the Commission will cease trade the plan (and any securities issued under the plan) effective July 15, 2014, if Hudbay extends its offer to expire no earlier than July 16, 2014 and provides a 10-day extension of the offer if it takes up any shares under the offer.”
Said Augusta: “In accordance with the decision of the British Columbia Securities Commission, Augusta’s shareholder rights plan will only be cease traded if Hudbay extends its offer until July 16, 2014, and Hudbay further extends its offer for an additional 10 days following any take up of Augusta shares thereunder. If Hudbay complies with these conditions, Augusta’s shareholder rights plan will be cease traded effective as of 5:00 pm (Vancouver time) on July 15, 2014.”
A few years of legal education may be needed to spot the finer points of this hair splitting.
Augusta shareholders must be scratching their heads as the adversaries stick doggedly to their advice. Hudbay says, “Tender your shares.” Augusta says, “Don’t tender your shares.” A all the shouting, the economic case to merge or not appears to be forgotten.