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Canadian copper miner Quadra FNX Mining Ltd. has agreed to be acquired by Polish mining giant KGHM Polska Miedz S.A. in a $3.5-billion all-cash deal. The offer is worth $15.00 a share and is a 32% premium over Quadra’s closing price on Monday. However, Quadra shares traded at higher levels early this year.
The stock jumped 36% to $15.40 in early trading in Toronto, just slightly above the KGHM offer, as investors speculated on the possibility of a higher bid.
Paul Blythe, Quadra FNX’s chief executive, said in a statement that the two companies held talks earlier this year about a joint venture to develop Quadra’s giant Sierra Gorda project in Chile. Then in recent weeks, KGHM made a proposal for the whole company.
“The proposal represents a significant premium to the current share price and we are recommending that our security holders vote in favour of the transaction,” he said.
On a conference call, Mr. Blythe added that Quadra FNX was not running a sale process or planning to sell itself. But when KGHM approached the company and said it was willing to pay a “substantial” premium, the board decided to take a close look at a deal.
KGHM, which is listed on the Warsaw Stock Exchange, has a market value of roughly US$8-billion and is the world’s ninth largest producer of copper and third largest producer of silver. The company has said publicly in recent months that it is interested in a Canadian acquisition. It is already active in Canada, as it is involved in a joint venture on a project in British Columbia.
Herbert Wirth, KGHM’s CEO, said the Quadra acquisition is in line with the company’s strategy of “focused development and value creation.”
“Quadra FNX has a proven track record and ambitious future development plans. Coupled with KGHM’s strong balance sheet and substantial positive cash flow, this transaction will provide a solid financial foundation and improve prospects for securing necessary financing for projects in Canada and abroad,” he said in a statement.
Quadra FNX controls mines in Canada’s Sudbury Basin, in the southern United States and in Chile. The company, formed last year through the merger of Quadra Mining Ltd. and FNX Mining Company Inc., has dealt with multiple operational challenges since the merger.
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