TORONTO Inmet Mining Corp IMN.TO said on Wednesday that it had turned down a C$4.86 billion (US$4.89 billion) unsolicited takeover bid from its larger rival First Quantum Minerals Ltd (FM.TO), sending Inmet shares up more than 17 percent.
The Canadian base metal miner, which is building the massive Cobre Panama copper mine in Central America, also said it had adopted a shareholder rights plan, giving it more time to evaluate bids and potentially seek alternatives to a takeover.
"Inmet doesn't need a dance partner," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services in Toronto. "Inmet is happy to go it alone and build what may be the premier copper mine to come on-stream in the latter half of this decade."
Under First Quantum's proposed cash and share offer, the company would have paid up to C$2.461 billion in cash and issued a maximum of 112.679 million shares, in a deal that valued Inmet at C$70 a share, or C$4.86 billion, Inmet said.
"After reviewing the proposal with its financial and legal advisors, Inmet's board of directors has today notified First Quantum that it has declined to pursue the proposal as it is not in the best interests of Inmet shareholders," the company said in a statement.
First Quantum was not immediately available to comment.
Toronto-based Inmet also said on Wednesday that the offer, which was made on November 25, followed a previous unsolicited offer from Vancouver-based First Quantum that valued Inmet's shares at C$62.50. Inmet said it turned down the first bid at the start of November.
The company denied earlier this month that it was in talks with First Quantum on a takeover.
Trading in Inmet stock was halted on the Toronto Stock Exchange at C$52.70 ahead of the news on Wednesday afternoon. The shares rose as high as C$65.00 after trading resumed and closed up C$9.30 at C$62.00. That was well below Inmet's 52-week high of C$70.34 in January.
Shares of First Quantum closed down 1.6 percent at C$20.80.
At C$70 a share, First Quantum's offer represents a 28 percent premium over Inmet's closing price of C$54.05 on Friday of last week.
With target companies now expecting rich premiums, First Quantum would have been better off starting higher, said Raymond Goldie, a senior mining analyst at Salman Partners in Toronto.
Goldie said that Inmet could also be attractive to a large copper producer, like Freeport-McMoRan Copper & Gold Inc (FCX.N), or a Chinese company.
"And then is First Quantum likely to come back? I think so," he added. "They know that this is just an initial starting negotiating position."
Inmet has been the subject of tie-up talks in the past. In early 2011, the company announced a plan to join forces with rival Lundin Mining Corp (LUN.TO) to create a new company called Symterra Corporation.
The so-called "merger of equals" was derailed when Equinox Minerals jumped into the fray with a counter bid for Lundin. That offer then fell apart when Equinox was taken out by Barrick Gold Corp (ABX.TO).
Inmet earlier this month walked away from a hostile takeover of Petaquilla Minerals Ltd PTQ.TO, which owns a gold mine adjacent to Cobre Panama, after the offer failed to secure shareholder support.
In addition to its 80 percent stake in Cobre Panama, Inmet owns operating mines in Turkey, Spain and Finland. First Quantum operates mines in Zambia, Mauritania and Australia.
($1 = 0.9936 Canadian dollars)
(Additional reporting by Claire Sibonney in Toronto; Editing by Leslie Adler and Bob Burgdorfer)