Poland's KGHM bids $3.5 billion for Quadra FNX; shares up 39%
Quadra FNX Mining (TSE:QUX) is up a whopping 39% today on news of a multi-billion-dollar takeout bid.
The Canadian base metals producer with offices in Toronto and Vancouver said it has agreed to have all its outstanding shares and warrants acquired by KGHM Polska Miedź S.A. (KGHM) for $3.5 billion. Quadra FNX has operating mines in Ontario, Arizona, Nevada and Chile, where the company is also developing the Sierra Gorda copper-molybdenum mine.
The project is a joint venture between Quadra FNX and Japanese metals producer Sumitomo Mining.
The total cost of the mine is estimated at US$2.8 billion and production is scheduled to start in 2014. According to Quadra FNX’s feasibility study, the production from current sulphide reserves will average 483 M lbs of copper, 25 million lbs of molybdenum, and 64 kozs of gold per annum over a 20-year mine life.
With a market cap of $8 billion, state-controlled Polish company KGHM is the world's 9th biggest copper producer and the third largest producer of silver.
Under the agreement, Quadra FNX shareholders will receive $15 in cash for each common share of Quadra FNX. The bid price represents a 41% premium on the 20-day weighted average price of the common shares as of Dec. 5. 2009 warrant holders will receive $1.68 in cash.
KGHM said it plans to finance the acquisition, including US$500 million in debt, with cash on hand.
Quadra FNX President and CEO Paul Blythe said the company is advising shareholders to accept the offer:
"KGHM participated in the process Quadra FNX ran to identify a joint venture partner for Sierra Gorda earlier this year. In recent weeks KGHM came forward with a proposal to acquire the Company, which has resulted in the agreement we are announcing today. This proposal represents a significant premium to the current share price and we are recommending that our securityholders vote in favour of the transaction."
In the event of a superior offer, KGHM has five business days to match it. If the deal is not completed due to a superior offer or other circumstances, Quadra FNX will pay KGHM a break fee of $75 million.
If the bid goes through, it would be one of the largest copper deals since Barrick Gold acquired Equinox Minerals earlier this year for $7.3 billion, and Minmetals Resources of China bought Anvil Mining Ltd. for $1.3 billion.