National Post (National Edition)
Post-takeover transition at Inmet
First Quantum starting process of integration
TORON TO • The transition of power is officially underway at Inmet Mining Corp.
Philip Pascall, the chief executive of First Quantum Minerals Ltd., spent Friday at Inmet’s head office in Toronto, interviewing employees to determine who to retain and how to integrate the two miners.
Meanwhile, across the street at the offices of First Quantum’s legal counsel, president Clive Newall marvelled at how smoothly his company completed an enormous $4.8billion hostile takeover.
“It went probably better than expected,” Mr. Newall acknowledged in an interview.
Indeed. When First Quantum launched the hostile bid in December, its main goal was to entice Inmet’s board into friendly negotiations. But Inmet rebuffed that approach, and as market conditions deteriorated, First Quantum stuck with its bid and refused to boost it.
It was a wise move. The offer officially succeeded late Thursday night, as 85.5% of Inmet shares were tendered.
From the beginning, Mr. Newall said he was pretty sure that there would be no other bidders. He noted that most of the senior mining companies are either breaking in new CEOs or are in the middle of other giant mergers. And he suspected that Chinese companies were “out of the market” after so many of their prior deals turned out disastrously.
“There did seem to be an opportunity opening up here,” he said.
Now Vancouver-based First Quantum is looking towards the future. Adding Inmet’s three copper mines — along with its massive Cobre Panama project — turns the company into one of the dominant players in the sector. It will be the largest copper-focused miner in the world, with a market cap of roughly $15-billion (similar to Teck Resources Ltd.). It expects to be one of the five largest copper producers in the world by 2018.
The deal should also open up First Quantum to a wider group of institutional shareholders, while lowering its cost of capital.
Of course, there is also an opportunity to use this platform to do more M&A. First Quantum has a lot on its plate over the next few years as it develops the Cobre Panama and Sentinel projects, as well as a copper smelter in Zambia. But as the major companies cut spending and look to sell non-core assets, it will keep its eye out for acquisitions.
The hard work at Cobre Panama is set to begin very soon. First Quantum will have its people on site next week to begin a detailed review of the US$6.2-billion project. The company is confident that it can find major cost savings at the mine, but expects to take a few months to identify them. It will also have to meet with Inmet’s key people in Panama, and figure out how to retain them. Analysts have raised concerns about whether these cost savings are really achievable, and about the potential political risk of Panama.
But those are concerns for another day. For now, First Quantum can enjoy its entry into the big leagues of global copper mining.
“There’s no doubt both our shareholders and Inmet’s shareholders bought in fully,” Mr. Newall said. “Particularly their shareholders.”