Inmet Mining Corp.'s largest shareholder, Leucadia National Corp., said Thursday it intends to tender to the hostile $72 takeover offer by First Quantum Minerals, and the miner's stock is trading a few cents below the offer price. That sends out two messages: First Quantum can stop bidding against itself after twice raising its original offer price. It also means that other potential suitors had better get moving, because the offer on the table is good enough for the holder of 16 per cent of Inmet stock.
That doesn't mean all investors share Leucadia's enthusiasm; indeed, the New York-based investment firm may be driven by different motives than other shareholders (Inmet's board hasn't announced whether it will recommend for or against the offer).
For starters, Leucadia's support is not unexpected. It is merging with investment bank Jefferies Group, Inc., which just so happens to be advising First Quantum on the deal.
That isn't to suggest favouring a Jefferies client would be the sole reason for Leucadia to tender so quickly. It also appears to be a motivated seller, eager to realize value from its investment portfolio, of which its stake of 11 million Inmet shares is a key piece. In an investor presentation about the Leucadia-Jefferies merger, the parties list the "inherent value creation potential" of Leucadia's existing assets, notably Inmet.
Lecaudia has also been active on the cash-generation front of late, selling three of its holdings for more than $1.2-billion. The merger parties also state that, following the merger, Leucadia would hold no investment that accounts for more than 10 per cent of its book value (other than its stake in a company called National Beef). Its Inmet stake as of last September accounted for slightly more than that level.
Leucadia isn't formally tendering to the First Quantum offer. Indeed, its support, as stated in a regulatory filing, is highly conditional. It "would intend to tender" its stake "based on currently publicly available information, and in the absence of changed circumstances or new information (including an alternative transaction that would provide greater value)," Leucadia states.
That's an open invitation to mining giants such as BHP Billiton Ltd. and Rio Tinto PLC to get a move on and come in with presumably higher bids, assuming they share a keen interest in Inmet's jewel asset, a majority stake in the giant Cobre Panama copper mine project in Panama. Whether these two companies – which have been cancelling projects and shoring up their financial positions of late – or others are in the mood, is a big question, but at least the market now knows an unopposed First Quantum takeout at the current price is a real possibility.