UPDATE 3-First Quantum moves closer to clinching Inmet takeover

Tue Mar 12, 2013 4:28pm EDT

* First Quantum extends hostile bid for Inmet to March 21

* Majority of Inmet shareholders tender shares in favor

* Inmet shares firm on TSX

By Euan Rocha

TORONTO, March 12 (Reuters) - First Quantum Minerals Ltd moved closer to clinching its acquisition of fellow Canadian miner Inmet Mining Corp on Tuesday after a majority of the miner's shareholders tendered shares in favor of First Quantum's $5 billion hostile bid.

First Quantum said a total of 43.2 million Inmet shares, or about 61.5 percent of its outstanding shares, had been tendered in favor of its offer. Vancouver, British Columbia-based First Quantum has now extended the offer to 11:59 p.m. EDT (1559 GMT) on March 21.

The endorsement from Inmet's shareholders takes First Quantum a step closer to buying Inmet and gaining control of Inmet's prized Cobre Panama project. The $6.2 billion project in the Central American country is one of the world's largest undeveloped copper deposits, and winning it would ease First Quantum's dependence on mines in Africa, particularly Zambia.

Toronto-based Inmet has urged its shareholders to reject First Quantum's offer, arguing it is inadequate. The miner has been attempting to sell a minority stake in Cobre Panama to boost its value and put it in a stronger negotiating position.

Barring a curve ball from Inmet, however, analysts believe that First Quantum has all but clinched the deal.

"Given that there are no other bidders, this really ought to be finished by March 21," said George Topping, an analyst at Stifel Nicolaus. "I think we can say we will finally be getting this behind us."

Inmet, which also owns mines in Turkey, Spain and Finland, has been the subject of takeover rumors for a months. In mid-November, it denied that it was in talks with any party, only to disclose later that month that it had received an unsolicited bid from First Quantum.

"This has been on the go for a long time and there has been nobody coming forward to make another bid. It is very unlikely anything changes, between now and March 21," Topping said.

Some analysts say that since a majority of Inmet's shareholders have shown they favor First Quantum's bid, Inmet could face legal challenges if it attempts to scupper the First Quantum offer at this point by selling a minority interest in Cobre Panama.

Barclays Capital analyst Ian Rossouw also said a First Quantum takeover of Inmet is positive for the development of Cobre Panama.

"We believe that the strong management team at First Quantum should help the existing project team at Inmet to deliver the vast Cobre Panama project on time and within budget," he said in a note to clients.

FIRST QUANTUM OFFER

Inmet has said it would be willing to enter discussions with First Quantum if the company made a fair offer. David Ryan, a spokesman for Inmet, declined to comment on the results of the tender offer on Tuesday.

First Quantum said its offer has been tweaked to allow it to go forward if more than 50 percent of Inmet's outstanding shares are deposited before the offer's new expiration. The offer was previously contingent on more than two-thirds of the shares being tendered in favor of the deal.

The cash-and-stock bid, which was earlier set to expire at 11:59 p.m. EDT on Monday, was worth roughly C$5.1 billion ($4.97 billion) or C$72 a share, when it was announced in December.

Inmet shareholders have the option to get paid all in cash, all shares, or a mix. The offer is subject to a maximum cash outlay of about C$2.5 billion and a maximum aggregate number of First Quantum shares issued of about 115.9 million, representing an overall mix of 50 percent cash and 50 percent shares.

Assuming a mix and based on the closing price of First Quantum shares on the Toronto Stock Exchange on Monday, the offer valued Inmet at C$70.02. Inmet shares, which closed at C$68.63 on the Toronto Stock Exchange on Monday, rose to trade in line with the First Quantum offer price on Tuesday.

They closed C$1.35 higher at C$69.98, while First Quantum shares were up 5 Canadian cents at C$20.69.

First Quantum also tweaked its bid to allow eligible holders of Inmet shares who elect to receive First Quantum shares to enjoy a tax-free rollover for Canadian income tax purposes.

"We believe this would also incentivize more Canadian shareholders to tender into the offer," Rossouw said.

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