Home > Mergers & Acquisitions > Copper wars: Minmetals in $6.5bn bid for Equinox

Copper wars: Minmetals in $6.5bn bid for Equinox

April 4, 2011

“China’s Minmetals Resources has launched a C$6.3bn (US$6.5bn) unsolicited bid for Equinox Minerals, the Australian-Canadian copper miner which itself is in the throes of seeking to acquire Vancouver-based Lundin Mining. The bid is the largest-ever unsolicited takeover attempt by a Chinese mining company, at a time when China’s miners are increasingly seeking to go abroad.

Minmetals on Sunday night said its all-cash offer of C$7 per share, a 23 per cent premium to Friday’s closing price, was a superior alternative for Equinox shareholders to the Lundin acquisition, offering them ‘certainty of value and timing in realising their investments’.

The bid is conditional on Equinox dropping its offer for Lundin. Andrew Michelmore, Minmetals’ chief executive, said that the Chinese group was only interested in buying Equinox, which he said aligned with Minmetals’ strategy for growth and enhanced its global production portfolio.”

Source: Financial Times, April 4 2011

Observations:

  • Minmetals is the third stage in the developing copper wars for consolidation in the industry. In the first stage Lundin and Inmet proposed a merger of equals named Symterra. In the second stage this merger was derailed by a takeover attempt of Lundin by Equinox.
  • Minmetals is one of the most active Chinese companies in foreign investment, buying most of the assets of Australian OZ Minerals to form Minerals and Metals Group (MMG) in 2009 for $1.4bln. It appears Minerals and Metals Group and Equinox will be combined. MMG is mainly run by western managers.

Implications:

  • For most shareholders the all-cash offer of Minmetals will be preferable to the takeover of Lundin, which would increase the gearing of the company to dangerous levels. Equinox’ management might be able to get a slightly better price from Minmetals, but it is unlikely that the company will stay independent.
  • The announcement of Minmetals comes on the same day the World Copper Conference kicks off in Santiago. Many of the industry’s CEOs are gathered for this event. Also today, Chinalco announced its intention to expand the scope of activities from aluminium to other commodities, including copper. It is unlikely that other state-controlled Chinese companies will come with a competing offer for Equinox, but the meetings around the Copper Conference might trigger other M&A developments in the industry.

©2011 | Wilfred Visser | thebusinessofmining.com

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