Inmet’s strategic error may aid First Quantum’s takeover bid
TORONTO — First Quantum Minerals Ltd. played its hand perfectly, while Inmet Mining Corp. made a key strategic error. As a result, First Quantum is on the verge of completing a hostile takeover for less money than almost anyone expected.
From the moment it targeted Inmet, First Quantum made a calculated bet that there would be no rival suitors. The reasoning was simple: management believed they were the only ones who could find meaningful cost savings at Inmet’s Cobre Panama project, a lowgrade, $ 6.2- billion US monstrosity. Therefore, they could offer more money and generate a better return on the project than anyone else.
A few analysts speculated Cobre Panama could draw a fierce auction, but First Quantum quietly built support among Inmet’s shareholders, while Inmet ran through alternatives and failed to turn up a white knight.
Meanwhile, Inmet passed up on numerous opportunities to strike a friendly deal with First Quantum at a higher price.
Quantum made vocal overtures to Inmet’s board both before and after launching the $ 5.1- billion hostile bid in mid- December, saying it wanted to enter friendly negotiations. The company stated it might offer more money if it could see Inmet’s confidential data on Cobre Panama. But Toronto- based Inmet rebuffed those efforts.
By the time Inmet finally allowed friendly talks in February, the world looked different: Metal prices were down, mining companies were announcing outrageous writedowns, and investors were rattled. The last thing First Quantum wanted to do was test its own investors’ patience with a higher offer for Inmet. Instead, it decided to let the current cash- and- stock bid run its course and see how many shares were tendered.
Sources close to Vancouverbased First Quantum speculated that Inmet was caught off- guard on Monday when a whopping 61.45 per cent of its shares were tendered. First Quantum was also surprised by such a high tender, according to sources, though it knew it had support from key institutional investors.