Augusta calls HudBay’s bid ‘desperate’
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.