Lundin Mining Corp. launched a hostile $1.4-billion takeover bid for fellow Canadian miner Nevsun Resources Ltd. on Thursday, saying it had failed to persuade Nevsun’s board to strike a friendly deal over the past nine months.
In a direct pitch to Nevsun shareholders for its $4.75 a share offer, cash-rich Lundin said in a circular it became apparent over time that Nevsun management was unlikely to agree to a transaction, despite multiple attempts to address its concerns.
“Each time we presented a proposal, the goalpost changed,” said outgoing Lundin CEO Paul Conibear on a conference call Thursday.
After markets closed on Wednesday, Lundin unexpectedly said that 61-year-old Conibear would retire at year-end and be replaced by the company’s chief financial officer.
The announcement of a new CEO on the eve of launching its hostile bid may suggest there is internal debate at Lundin around the deal, said Adrian Day Asset Management, Nevsun’s tenth-biggest shareholder.
“It can’t help but raise questions whether Mr. Conibear, who by no means is an elderly man, is on board with the acquisition,” said Adrian Day, whose fund holds about 3.3 million shares.
“I found the timing remarkably surprising. One would have thought that if this had been in the works, they might have hinted at it.”
Toronto-based Lundin has made five unsuccessful attempts to acquire Nevsun’s large copper and gold project in Serbia, but has not offered to buy its other asset, a mine in Eritrea, until now.
Nevsun has rejected Lundin’s proposals as inadequate, most recently in May when Lundin partnered with tiny Euro Sun Mining., which would have acquired the Eritrean mine, in a stock and cash proposal worth approximately $1.5-billion.
Lundin said on June 16 that its best option was a direct offer to Nevsun shareholders to buy the whole company, noting significant political change in Eritrea in its press release.
Eritrea and Ethiopia signed a peace accord this month, ending decades of hostility and war sparked by Eritrea’s push for independence and secession in 1993.
Vancouver-based Nevsun has advised shareholders to take no action until its board makes a formal recommendation within 15 days.
Shares of Nevsun, which ended Wednesday at $4.76, were trading at $4.80 Thursday, suggesting investors believe a sweeter bid is coming.
Nevsun previously said that Lundin’s $4.75 offer undervalues its assets, pointing to recent improvements at its Eritrean mine and a study on Timok’s upper zone which puts the net asset at $1.82 billion.
Several “strategic partners” have expressed interest in working with Nevsun on future development, Nevsun said Thursday, without identifying those companies.
Lundin’s offer, open until Nov. 9, requires support from more than 50 per cent of Nevsun shares. Lundin plans to fund the purchase with $1.5 billion cash on hand and an undrawn credit facility.
Analysts have said Timok could attract large diversified companies, such as Rio Tinto., but it is unlikely another Canadian midtier miner would compete with Lundin’s bid.