The friendly merger of Inmet Mining and Lundin Mining has run into a snag, namely an unsolicited takeover offer for Lundin made by Equinox Minerals of Toronto and Australia.
In mid-January Inmet and Lundin proposed an all-share deal to create a new company with a market capitalization of $9 billion. (See CMJ's Daily News for Jan. 13, 2011.) Analysts say the original deal is worth $3.6 billion.
Equinox, owner of the Lumwana copper-uranium-cobalt mine in Zambia, has offered a cash and share deal said to be worth $4.8 billion. It proposes to buy all outstanding Lundin shares for $8.10 each or issue 1.3 Equinox shares plus $0.01 for each Lundin share up to a maximum of 380 million new Equinox shares.
Lundin shareholders are going to have to do some thinking. An all-cash offer is very tempting. The company just finished 2010 with a net income to $317.1 million, more than a four-fold increase from $73.7 million in 2009. The 2011 production outlook is unchanged.
Inmet finished 2010 with a net income of $144.5 million, up 61% from a year earlier. But Inmet has every opportunity to restructure the deal with Lundin to create more value for shareholders.
Underlying this activity is a copper price at record highs, over US$4.50 per pound.
Lundin shareholders are in an enviable position.
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