June 23 (Bloomberg) -- HudBay Minerals Inc. reached an agreement to buy the rest of Augusta Resource Corp. for about C$436 million ($406 million) after sweetening a hostile offer for the developer of the Rosemont copper project in the U.S.
HudBay, which already owns 16 percent of Augusta, will offer 0.17 of a warrant to acquire one of its shares for each Augusta share, in addition to its original offer of 0.315 of a share. The revised bid is valued at about C$3.56 a share, the companies said today in a statement. That’s about 10 percent more than the value of HudBay’s previous offer based on its closing price on June 20.
The acquisition will allow Toronto-based HudBay to develop Augusta’s Rosemont project as its next mine after recently starting up two Canadian operations, with a project in Peru close to completion. The mine, southeast of Tuscon, Arizona, could account for as much as 10 percent of U.S. copper production, according to Augusta.
Augusta jumped 7.5 percent to C$3.44 in Toronto. HudBay fell 2.3 percent to C$10.05.
Augusta directors, officers and shareholders that control about 30 percent of Augusta’s fully diluted shares have agreed to support the revised offer from HudBay, the companies said today.
The revised offer is accretive to net asset value for HudBay, said Jackie Przybylowski, a Toronto-based analyst at Desjardins Capital Markets.
“We are supportive of the transaction,” Przybylowski said in a note today. “The acquisition of Rosemont fills HudBay’s long-term project pipeline and fits well with the company’s growth strategy.”
Augusta, based in Vancouver, had rejected HudBay’s previous offer as too low and opportunistically timed, saying it expected permits to develop Rosemont would be issued soon and boost its shares. Augusta ran a process to solicit higher bids and said in April it signed agreements to exchange confidential information with 10 groups, but didn’t announce any alternate transaction to HudBay’s offer.
“After a thorough process to consider all of our alternatives, we are pleased to have agreed on a mutually beneficial transaction representing a successful conclusion to our value maximizing process,” Augusta Chairman Richard Warke said in the statement.
HudBay also has a right to match any alternative deal proposed by another party and will receive a fee of C$20 million under certain circumstances if the deal isn’t completed.
BMO Capital Markets and GMP Securities LP are acting as financial advisers to Hudbay and Goodmans LLP and Milbank, Tweed, Hadley & McCloy LLP are its legal counsel. Augusta is being advised by Scotia Capital Inc. and TD Securities Inc. as financial advisers and Davies Ward Phillips & Vineberg LLP and Cravath, Swaine & Moore LLP as legal counsel.
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