Why First Quantum’s bid for Inmet likely won’t be its last – Bloomberg News (National Post – December 18, 2012)

The National Post is Canada’s second largest national paper.

The cheapest copper mining deal in five years has traders convinced that First Quantum Minerals Ltd.’s latest bid for Inmet Mining Corp. won’t be its last.

The C$5.1 billion ($5.2 billion) offer values Inmet, owner of the second-biggest copper mine under construction, at the lowest multiple of earnings before interest, taxes, depreciation and amortization for a deal of its size in the industry since 2007, according to data compiled by Bloomberg. Inmet shares climbed yesterday 1.2 percent above the C$72-a-share proposal — First Quantum’s third offer for the Toronto-based company since October — indicating arbitrageurs who bet on acquisitions expect another boost, the data show.

After Inmet last week raised estimates for the amount of copper contained at its Cobre Panama mine, Canaccord Financial Inc. said it would take a bid of at least C$80 a share to win over investors, particularly with the top shareholders controlling a majority of the stock. While Inmet could draw other suitors, Vancouver-based First Quantum’s desire for a friendly deal suggests it may be willing to pay more whether or not there are rival bidders, according to Bank of Montreal.

“The market is clearly saying that we are going to need a higher price to push this through,” Barry Schwartz, a Toronto-based fund manager at Baskin Financial Services Inc., which oversees about C$450 million including Inmet shares, said in a telephone interview.

Cobre Panama “is going to be one of the greatest mines that’s going to come on stream in the second half of the decade. We’re running out of quality finds of copper, and Inmet has one of them.”

Flora Wood, a spokeswoman for Inmet, declined to comment on the potential for an increased bid. The company yesterday said it hadn’t yet received the latest offer and that it will evaluate any formal proposal.

Sharon Loung, a spokeswoman for First Quantum, didn’t respond to a phone call or e-mail seeking comment yesterday.

First Quantum, a producer of copper in Africa and nickel in Australia and Finland, said on Dec. 16 that it offered C$72 in stock and cash for each Inmet share, raising its bid for the company after Inmet spurned two earlier unsolicited proposals of C$62.50 and C$70. The latest price is 36 percent more than Inmet’s closing level on Nov. 27, the day before the company disclosed the two prior offers and adopted a poison pill to thwart a hostile takeover.

Including net debt, the proposal values Inmet at 7.6 times its Ebitda during the past 12 months, according to data compiled by Bloomberg. That’s the lowest Ebitda multiple among deals of $500 million or more in the copper-mining industry since Teck Resources Ltd. bought Aur Resources Inc. in 2007, the data show.

Inmet gained 4.3 percent yesterday to C$72.85 on news of First Quantum’s increased offer, signaling traders expect an even higher bid, said Sachin Shah, a Jersey City, New Jersey- based special situations and merger arbitrage strategist at Tullett Prebon Plc.

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