Lundin Mining Corp. [LUN-TSX; LUMI-Sweden], on Tuesday July 17, announced plans to launch an all-cash hostile takeover bid for Nevsun Resources Ltd. [NSU-TSX; NYSE AMERICAN], saying it will take the offer directly to the company’s shareholders.
News of the $4.75 per share offer, worth $1.4 billion, means Lundin is effectively abandoning the complicated joint proposal whereby Lundin was seeking to only acquire Nevsun’s Timok copper-gold project in Serbia, leaving Euro Sun Mining Inc. [ESM-TSX, CPNFF-OTC] with the producing Bisha Mine in Eritrea
Timok accounts for 89% of Nevsun’s asset value, according to a Scotiabank report.
“While we view the proposed transaction as a positive for Lundin shares, we believe the deal risk remains high due to the likely requirement of a higher bid and a strong potential for a white knight,” said Scotiabank in a report.
Nevsun shares jumped 13.5% or $0.57 to $4.78 on the news on volume of 6.8 million shares in early trading Tuesday.
Nevsun is a leading mid-tier base metals company. It operates Bisha, a high-grade open pit copper-zinc mine in Eritrea and is developing the Timok copper-gold project. Timok is located in the historic Bor mining district and benefits from close proximity to existing mining infrastructure.
The company was previously the target of a high profile proposal that would have seen Euro Sun acquiring 100% of Nevsun. Upon acquisition of the Nevsun shares, Euro Sun would then have vended Nevsun’s European assets, including the Timok project, to Lundin. This would have left the producing Bisha Mine in Eritrea as Euro Sun’s principal asset.
Published reports say the proposal had been structured this way because Lundin Mining covets the Timok copper-gold project but its board of directors wasn’t keen on investing in Eritrea, where the Bisha Mine is located.
However, Nevsun recently rejected the $1.5 billion takeover proposal. It said the unsolicited offer was dated April 30, 2018 and made public by Euro Sun and Lundin on May 7, 2018.
“The Nevsun Board of Directors is unanimous in its belief that the non-binding unsolicited proposal fails to reflect the strategic value of our asset base,” said Ian Pearce, Chair of Nevsun’s Board of Directors.
“The non-binding unsolicited proposal also presents a problematic structure that could further undermine value to shareholders,” he has said.
Still, a senior official at Nevsun’s second largest shareholder, M&G Investment Management, recently said the $1.5 billion takeover proposal from Lundin and Euro Sun looked “pretty fair.”
“Nevsun should engage more fully with Lundin Mining and Euro Sun Mining, which made the proposal and run a full sales process,” said Jamie Horvat, director of global equities for M&G Investment Management, which owns 9.5% of Nevsun.