First Quantum ‘surprised and disappointed’ at Inmet Mining’s rejection of C$4.86b offer

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African Copperbelt Map (FQM Picture
African Copperbelt Map
(FQM Picture

While some suggest First Quantum Minerals may not want to engage in a hostile takeover of Canadian copper miner Inmet, additional offers could be forthcoming from other companies.

First Quantum Minerals confirmed Thursday that it had approached Inmet Mining on October 28th “on a friendly basis to discuss a possible combination of the two mining companies.

In a statement issued Thursday, First Quantum said the company had unrivaled expertise in delivering large projects on time and on budget.

“With the recent successful commission at Ravensthorpe and Kevitsa mines, as well as the ongoing construction of First Quantum’s $1.72 billion mine at Sentinel, a project of similar size to the Cobre project, First Quantum’s Project reputation and expertise is well established,” said First Quantum. “We believe this would be useful in a combined company to the execution of the Cobre Panama.”

First Quantum CEO, Philip Pascall, said he contacted Inmet’s chairman and CEO, following up with a formal letter offering C$62.50 per Inmet share. On November 1st, Pascall received a response from Inmet CEO Jochen Tilk declining the offer.

Pascall said he contacted Tilk on November 8th to request a face to face meeting, but Tilk declined to meet, “indicating that the Inmet Board and the management team saw no merit in further discussing First Quantum’s proposal.”

First Quantum then submitted “a revised and improved friendly proposal to Inmet on November 25th,” increasing its offer price to C$70 per share—structured as 50% cash, 50% First Quantum shares. “First Quantum again sought to engage in a constructive dialogue with Inmet regarding this improved proposal,” the company said. The second offer is valued at C$4.86 billion.

On November 28th, the Inmet Board rejected the second proposal in a public announcement, “declining to engage in discussions and indicating that they believed the proposal to be ‘highly conditional.’ First Quantum’s proposal included a short period of limited due diligence focused on Cobre Panama and was otherwise made on the basis of customary conditions for a transaction of this nature,” according to First Quantum.

“The transaction would have presented an opportunity to realize immediate and attractive cash value for the holders of Inmet shares while preserving the opportunity for both sets of shareholders to participate in the substantial upside value that we believe would be created through a combination,” said Pascall.

“First Quantum is both surprised and disappointed at the circumstances under which the Inmet Board chose to forego the significant opportunity without ever engaging in any discussions as they were three times invited to do so,” Pascall declared.

Analysts suggest that First Quantum is not eager to engage in a hostile bidding war for Inmet.

The Financial Times reported that an unidentified investor suggests that First Quantum could seek to reduce the $6.2 billion price tag for the Cobre Panama Project. Others have speculated that First Quantum’s bid “was an early attempt to snap up Inmet before Cobre Panama boosted the company’s valuation,” according to the FT.

Scotia analyst Tom Meyer suggested that a starting point for a fair bid would be $84.

Canada’s Financial Post reported that RBC Capital markets analyst Fraser Phillips advises “we could see further bids for Inmet in the near term given the scarcity of large, quality copper assets.”

Analysts at BMO say they see a “high probability” of other companies bidding for Inmet.

Reuters quoted “a source close to First Quantum” who reportedly said the company has received indications from some “significant investors in Inmet that they would like the company to engage with First Quantum on the proposed bid.”

However, UBS analyst Matt Murphy wrote in a note to clients that “we believe most interested parties had an opportunity to earn-in to the project or acquire Inmet during its partnership search and are unlikely to now engage in a bidding war.” (By Mineweb)

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