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Lundin Rejects Equinox’s $4.26 Billion Bid for Low Price, Reliance on Debt

Lundin Mining Corp. (LUN), the Canadian copper and zinc producer that agreed to be acquired by Inmet Mining Corp. (IMN), rejected Equinox Minerals Ltd. (EQN)’s C$4.2 billion ($4.3 billion) rival unsolicited takeover bid as too low.

Equinox’s offer represents an inadequate takeover premium and the Perth-based company would take on too much debt to finance the acquisition, Toronto-based Lundin said yesterday in a statement. The all-stock bid from Inmet, also based in the Canadian city, is valued at C$3.59 billion.

Equinox and Inmet are battling to acquire Lundin’s stake in a copper and cobalt venture in the Democratic Republic of Congo and four mines in Europe as a lack of new projects forces miners to expand through acquisitions. Equinox, which said it will finance its bid with a $3.2 billion loan, dropped 8.6 percent in Toronto trading through March 18 since making the offer last month.

“If you look at Equinox’s share price, the fact that it has come off quite significantly, people are probably expecting a higher or more competitive bid to get it over the line,” said Chris Weston, an institutional dealer at IG Markets in Melbourne.

Equinox rose 2 cents to C$5.26 at 9:59 a.m. in Toronto Stock Exchange trading, while Lundin fell 5 cents to C$7.29 and Inmet rose C$1.26, or 1.9 percent, to C$67.

Special Advisers

A special committee, advised by Haywood Securities Inc., recommended Lundin’s board reject the Equinox bid, Lundin said in the statement. The board received the same advice from its own adviser, Scotia Capital Inc., Lundin said.

Michael Vaughan, an outside spokesman for Equinox, wasn’t immediately able to comment when contacted by telephone.

Inmet, with operations in Spain, Finland and Papua New Guinea, agreed to buy Lundin to create a copper miner called Symterra with the potential to produce more than 500,000 metric tons by 2017. Lundin has a 25 percent stake in the Tenke Fungurume copper and cobalt project in Congo and mines in Sweden and Portugal, producing copper, zinc and lead.

Equinox would finance the cash component of its offer through a $3.2 billion bridging loan arranged through Goldman Sachs Group Inc. and Credit Suisse Group AG, Equinox said on Feb. 28. Goldman Sachs is also lead financial adviser to Equinox.

Debt, Forecasts

“Taking on $3.2 billion in debt on partially undisclosed terms, and the basis of their production forecasts are two things in particular to reflect on,” Lundin Chief Executive Officer Phil Wright said in the statement. Lundin directors, officers and “certain shareholders” have confirmed they will not tender their shares into the offer, Lundin said.

Equinox’s announced bid was 14 percent more than Lundin’s average share price over 20 days. That compares with an average 27 percent premium among base-metals deals globally announced in the past 12 months, according to data compiled by Bloomberg.

Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, is likely to make a rival proposal as it seeks to increase its stake in the Tenke project, jointly owned with Congo’s government and Lundin, said WallachBeth Capital LLC’s Yemi Oshodi said this month.

“There has been talk that there could be a counterbid,” Weston said. “That hasn’t materialized yet, maybe they wanted to see how the board reacted and wanted to test out the waters before that was going to be the case.”

The average copper price will climb 22 percent this year, Standard Bank Plc said last month. A combination of Equinox and Lundin would create a global top-10 copper producer, based on 2011 production forecasts, Equinox said in a presentation.

Saudi Mine

Equinox, with a market value of C$4.59 billion, completed the purchase of Citadel Resource Group Ltd. in January for A$970.5 million ($975.7 million), its first acquisition in six years. Citadel owns the $305 million Jabal Sayid copper and gold project in Saudi Arabia. Equinox’s $841 million Lumwana project is Zambia’s biggest foreign investment.

Canadian companies were involved in $16.4 billion of announced deals in January, second only to the $21.2 billion recorded in the same month in 2007, according to Bloomberg data.

Equinox made its unsolicited offer on Feb. 28. Inmet and Lundin agreed Jan. 12 to their deal. Equinox proposes paying C$8.10 or 1.2903 shares and 1 cent for every Lundin share, prorated based on a maximum cash consideration of C$2.4 billion.

To contact the reporters on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net.

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