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UPDATE 2-Equinox weighs $6.5 bln bid from Minmetals, extends Lundin offer

Published 04/05/2011, 12:28 AM
Updated 04/05/2011, 12:32 AM
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* To give view on Minmetals' $6.5 bln offer in a few days

* Extends offer for Lundin to April 29, shareholder vote April 26

* Analysts expect Equinox to reject Minmetals offer

* Equinox Toronto shares close 8% above Minmetals offer

* Lundin shares slide 4% to well below Equinox's offer (Adds Minmetals CEO, analyst and banker comments)

By Sonali Paul

MELBOURNE, April 5 (Reuters) - Equinox extended its $4.8 billion bid for Lundin Mining and postponed a vote on the deal by two weeks on Tuesday, awaiting a formal $6.5 billion takeover offer from China's Minmetals Resources .

Minmetals, China's biggest metals trading firm, unveiled plans to launch a C$7 a share bid for Equinox on Monday, chasing Equinox's copper assets in Zambia and Saudi Arabia.

"It is a very good, compelling offer. We are willing to pay cash up front," Minmetals Chief Executive Andrew Michelmore told Reuters on the sidelines of a mining conference in Singapore on Tuesday.

He said he would not comment on whether this was the best and final offer for Equinox.

Equinox said it was considering the proposal and would update investors on it "in the coming days".

Equinox postponed a shareholder vote on the Lundin deal to April 26 to give investors time to consider the board's and any other recommendations on Minmetals' share offer and the Lundin deal before they have to vote.

Minmetals, which already has a 4.2 percent stake in Equinox, said it would only go ahead with the offer if Equinox dropped its bid for Lundin.

Equinox's Toronto-listed shares closed up 32 percent at C$7.55 on Monday, indicating investors are holding out for a higher bid.

COUNTERBIDS SEEN UNLIKELY

Analysts and an investment banker said they expected Equinox to reject the offer and predicted Minmetals would raise the bid, but said it would be tough for any other companies to bid against Minmetals.

"It is not a massive premium. You can envisage most investment banks are scurrying around trying to saddle up another horse but it is not that easy finding counter-parties," said an investment banker not involved in the deal.

"Firstly, it is a big price, and secondly, they have to be comfortable with Saudi Arabian risk and also Zambian risk and not everyone is. Thirdly, it is also hard going up against the Chinese who are pretty well funded."

An analyst predicted Minmetals would have to offer between C$7.80 and C$8.00 to win over Equinox shareholders, assuming long-term copper prices of around $2.50 a pound.

"I'd be expecting a small increase in Minmetals' bid, without someone else coming over the top," said the analyst in Sydney, who declined to be named as he was not authorised to speak to the media.

He said an offer of C$9 or more could be justified, if long-term copper prices were seen at $3 a pound or above. Minmetals' Michelmore has not said what the company's long-term view on copper prices is.

The jump in Equinox's shares bolstered the value of its offer for Lundin to C$8.92 a share, but also made it less likely that Equinox would go ahead with its bid.

Equinox has been chasing Lundin for its Neves Corvo copper-zinc mine in Portugal and its 24.75 percent stake in the massive Tenke Fungurume copper mine in the Democratic Republic of Congo.

Lundin rejected Equinox's offer and last week flagged it was looking for a white knight or knights to trump Equinox.

With Equinox receiving the unsolicited bid from Minmetals, investors trimmed their bets on a takeover battle erupting for Lundin, sending Lundin's shares down 4 percent to C$8 on Monday, well below the value of Equinox's offer.

Equinox's depositary receipts in Australia were up 1.2 percent on Tuesday at A$7.44 after touching a fresh record high of A$7.51. ($1 = 0.970 Canadian Dollars) (Additional reporting by Michael Smith in SYDNEY, Saeed Azhar and Harry Suhartono in SINGAPORE; Editing by Ed Davies and Muralikumar Anantharaman)

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