Minmetals Drops Equinox Bid After Being Trumped by Barrick's $7.68 Billion http://www.bloomberg.com/news/2011-...uinox-after-being-outbid-by-barrick-gold.html By Bloomberg News - Apr 26, 2011 2:53 PM GMT+0800 inShare More Print Email Andrew Michelmore, chief executive officer of Minmetals Resources Ltd. Photographer: Jerome Favre/Bloomberg Minmetals Resources Ltd. (1208), controlled by China's largest metals trader, abandoned its offer to buy Equinox Minerals Ltd. (EQN) after Barrick Gold Corp. (ABX) topped it with a C$7.32 billion ($7.68 billion) cash bid. "The price offered by Barrick is above our most optimistic assessment of value," Andrew Michelmore, chief executive officer of Hong Kong-based Minmetals, said today in a statement. "Competing with Barrick at these prices would, in our view, be value destructive." The withdrawal clears the path for Toronto-based Barrick to take control of the Lumwana mine in Zambia and Saudi Arabia's biggest copper deposit, in the world's most expensive copper mining takeover. Minmetals plunged in Hong Kong trading on concern it missed an opportunity to shore up metal reserves as China's demand grows. "Minmetals had wanted to diversify its nonferrous metal businesses by adding copper assets," said Helen Lau, a Hong Kong-based analyst with UOB Kay Hian Ltd. "To become a world- class mining company, it has to do a lot of acquisitions." Minmetals dropped 7.9 percent to HK$5.26 at 2:28 p.m. in Hong Kong, after falling as much as 13 percent. The company, controlled by state-owned China Minmetals Group, will concentrate on other opportunities and developing its own assets that include the world's second-biggest zinc mine and projects in Australia, Laos and Canada. The Equinox offer by Minmetals was already China's largest ever proposed takeover of a mining company, and the 32 percent premium over the 20-day trading average would have been the most a Chinese company has paid for a mining deal greater than $500 million, according to data compiled by Bloomberg. 'Prudent Buyers' "China will continue to be very prudent buyers of assets," Chris Weston, an institutional dealer at IG Markets in Melbourne, said by mobile phone today. "They will be prepared to pay up for the right company at the right time. They may have looked at Barrick and said: 'They want it more. We don't want to get into a huge bidding war.'" The offer from Barrick, the world's biggest gold company, values Perth, Australia-based Equinox at 13.5 times earnings before interest, taxes, depreciation and amortization, a record level for a copper takeover, according to data compiled by Bloomberg. It is priced at C$8.15 a share, 16 percent more than Minmetals' offer and 17 percent more than Equinox's average share price over the past 20 trading days. Expensive Valuations The bid values Equinox's equity at 28 times net income, the highest for an acquisition in the industry and topping the 24 times multiple that underpinned Minmetals's abandoned proposal. "Equinox is expensive, but nothing is cheap now," said UOB's Lau. "Minmetals may have to wait until resource prices fall, but it's unlikely to happen anytime soon." Copper for delivery in three months on the London Metal Exchange traded at a record $10,190 a metric ton, or $4.62 a pound, on Feb. 15. It will average $9,760 a ton this year and $10,350 in 2012, according to the median of analysts' estimates compiled by Bloomberg. The metal would have to continue to trade for at least $3.40 a pound to justify paying C$7.32 billion for Equinox, according to George Topping, a Toronto-based analyst at Stifel Nicolaus & Co. He expects copper prices to fall below that level by 2015 to $2.50 a pound. The boards of Barrick and Equinox both agreed to the combination, which still requires approval from two-thirds of Equinox's shareholders, according to the statement yesterday. The takeover is also subject to a C$250 million break fee. The deal would be the second-largest acquisition by Barrick, after its $9.93 billion purchase of Placer Dome Inc. five years ago, according to data compiled by Bloomberg. It's proposing to pay 1.39 times Equinox's enterprise value, compared with the 1.36 median multiple of 10 comparable deals in the past four years, according to Bloomberg data. --James Paton, Helen Yuan. With assistance from Tara Lachapelle in New York and Chris Donville in Vancouver. Editors: Andrew Hobbs, Alan Soughley To contact the Bloomberg News staff on this story: James Paton in Sydney at [email protected]; Helen Yuan in Shanghai at [email protected] To contact the editors responsible for this story: Andrew Hobbs at [email protected] Amit Prakash at [email protected]
