First Quantum Confident Inmet Holders to Follow Leucadia’s Lead
Leucadia National Corp. (LUK), which owns a 16 percent stake in Inmet, said yesterday it plans to tender shares in the Canadian mining company in support of First Quantum’s takeover proposal. First Quantum took the C$72-a-share offer in cash and stock straight to Inmet investors on Jan. 9 after twice being snubbed by the Toronto-based company’s board.
“We welcome the support of Inmet’s largest shareholder,” First Quantum President Clive Newall said today in a phone interview. “We are confident that a large number of shareholders share our excitement in the prospects for the combined group and confident that many more of them will follow suit.”
First Quantum is seeking to gain control of Inmet’s copper project in Panama to create one of the world’s five largest producers of the metal. Its offer requires acceptance by holders of 66 percent of Inmet shares.
“Inmet’s board has not yet announced whether it will recommend the offer, but this announcement will likely put pressure on the board to recommend,” Nomura International Plc wrote in a note today.
Inmet, which has until Jan. 24 to respond to First Quantum’s latest approach, said earlier in the week it will evaluate the bid “carefully” and also examine other strategic options, some of which pre-date First Quantum’s approach.
Leucadia, a New York-based holding company, said in a statement it intends to tender its shares “in the absence of changed circumstances or new information” including another transaction that would provide greater value.
Inmet stockholders are being offered First Quantum shares, cash, or a combination of both resulting in a total mix of about 50 percent in shares and 50 percent in cash. The cash component of the latest offer will be financed through existing cash resources, undrawn financing facilities of $1.25 billion and a $2.5 billion acquisition facility provided by Standard Chartered Bank, First Quantum has said.
First Quantum’s offer is 36 percent more than Inmet’s closing price on Nov. 27, the day before Inmet said it rejected two previous unsolicited proposals from First Quantum. Inmet shareholders have until Feb. 14 to decide whether to back it.
While Inmet’s Cobre Panama copper project will cost about $6.2 billion and produce an average of 266,000 metric tons a year, First Quantum is developing the Sentinel copper project in Zambia which will produce as much as 300,000 tons of copper by the end of 2014 at a cost of about $1.7 billion.
First Quantum has said costs are lower than at Cobre Panama mainly because it’s using its own staff rather than outsourcing the project.
“All of the shareholders we talked to can see the vision of creating a new go-to copper company and can see all the merits of the transaction in that regard,” Newall said today. “The shareholders of course question the ability to reduce the capital cost and whether they can rely on us to deliver that and we are confident that we can.”
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