NEW YORK Augusta Resource Corp. has called HudBay Minerals Inc.s offer to extend its unsolicited takeover bid for all of the companys outstanding shares and waive the minimum tender condition a desperate attempt to give life support to their bid.
Vancouver, British Columbia-based Augusta said the offer has received minimal support from shareholders, with less than 0.5 percent of shares tendered, and the companys shares have traded at a 27-percent premium since HudBay announced its takeover bid in February (amm.com, Feb. 12).
Toronto-based HudBay offered 0.315 of a HudBay common share for each Augusta common share held, valuing Augusta at an enterprise value of about Canadian $540 million ($486.1 million). The offer represented a premium of 62 percent to Augustas 20-day volume-weighted average price on the Toronto Stock Exchange for the period ending Feb. 7, according to HudBay.
HudBay started this process with a lowball bid, which the market clearly has rejected. Now, when their bid is failing, HudBay drops their minimum tender condition in a desperate attempt to give life support to their bid, Augusta executive chairman Richard Warke said in a statement March 17.
Rather than making a proper offer that Augusta shareholders would view as fair, HudBay is opting to proceed with plan B, which is to try to secure a minority blocking position to thwart any future strategic alternatives, Augusta chief executive officer Gil Clausen said.
Steve Parsons, an analyst at Montreal-based National Bank Financial who covers Augusta, said the offer extension is a clear indication that the bid is below the tender offer, adding that Augusta on a standalone basis would be trading higher than the offer price, and as it continues to make progress on permits it will trade at a higher share price than the offer.
Parsons said the coming weeks will be crucial for Augusta: The company is scheduled to announce first-quarter results March 26 and the U.S. Army Corps of Engineers is slated to announce its decision on whether or not to approve a Clean Water Act permit for its Rosemont copper deposit near Tucson, Ariz.
Separately, HudBay said it had acquired 4.9 percent of the outstanding shares of Vancouver-based Panoro Minerals Ltd., which is developing copper projects in Peru. The deal gives HudBay 11.2 percent of Panoros outstanding shares.