New battle lines are being drawn in the takeover war for Lundin Mining Corp.
Lundin, open to new buyers after its deal with Inmet Mining Corp. fell apart, kicked off its first day in play by criticizing a hostile bid by Equinox Minerals Ltd. as "lousy and opportunistic." Lundin insisted the market is undervaluing its assets in Europe and Africa.
Equinox, meanwhile, played down Lundin's ability to find a better offer than its $4.8-billion bid, suggesting that if there were other potential buyers for the copper-focused company, they would have surfaced by now.
The war of words is expected to intensify as the April 14 deadline approaches for Lundin shareholders to decide whether to tender to Equinox's cash-and-share offer, or wait for Lundin to come up with a better alternative.
Lundin adopted a shareholder-rights plan late Tuesday, also known as a "poison pill," to try to prevent a takeover until the end of May, while it "actively and aggressively" seeks alternatives. Equinox is expected to challenge that move through regulatory channels.
Trading in Lundin shares on Wednesday, the day after the Inmet merger was called off, suggests investors are optimistic another bidder could come along. Lundin shares closed up nearly 5 per cent at $7.96, which is higher than the Equinox offer of $7.69 (based on Wednesday's close).
Lundin, which has copper, nickel and zinc assets in Europe and a 25-per-cent stake in the promising Tenke Fungurume copper-cobalt project in the Democratic Republic of the Congo, could choose to sell the company as a whole, or split it and sell off parts.
"We have a Tier 1 asset in Tenke that would appeal to a lot of Tier 1 companies, plus some sovereigns. That will attract attention," Lundin chief executive officer Phil Wright said in an interview. He said the company's mines in Europe also could be attractive to those companies, or others.
"We recognize that it's likely the individual value of our assets considerably exceeds our market cap," he added. "Given the fact we are in play … we need to look at how, if at all, we unlock some of that value."
Lundin has lashed out at the Equinox bid as too highly leveraged with $3.2-billion (U.S.) in debt, and vulnerable to increased geopolitical risk with mines in Africa and Saudi Arabia.
"We are not running in fear of Equinox," Mr. Wright said. "Equinox has a lousy bid that's opportunistic … It's highly unlikely our shareholders will be attracted to accept it."
Equinox maintains no other bidder will come forward for Lundin since the company spent weeks last fall looking at options before coming up with the Inmet merger, which has since fallen apart because of problems with its flagship project in Panama.
"Our offer has always been and remains the clear and compelling choice for Lundin shareholders," said Equinox CEO Craig Williams.
Equinox is also considering a legal challenge of a clause in the Inmet-Lundin agreement which states Inmet will be entitled to a $120-million break fee if Equinox's deal to buy Lundin succeeds.
Inmet shares jumped nearly 7 per cent Wednesday, suggesting investors also see it as a possible takeover candidate.
That's despite uncertainty in recent weeks around Inmet's flagship Cobre Panama mine, which was behind the demise of its merger with Lundin. The Panamanian government wants plans for the project's power supply changed from coal to natural gas, which analysts said could result in delays and higher costs. Inmet maintains the change will not have a material impact on the timing or economics of Cobre Panama, set to begin production in 2016.
Inmet CEO Jochen Tilk said in an interview Wednesday that his company will now look for a partner for Cobre Panama, while maintaining "a pretty significant stake."
On the breakup of the deal with Lundin, Mr. Tilk said the companies couldn't agree on the value of the deal after Lundin shares shot past Inmet's in the aftermath of Equinox's offer and concerns around Cobre Panama.
"We just couldn't agree on term of values at the end that would satisfy our respective shareholders," Mr. Tilk said.