CHICAGO First Quantum Minerals Ltd's (FM.TO) hostile C$5.1 billion ($5.17 billion) takeover bid for Inmet Mining Corp IMN.TO took a tense turn on Saturday, as the Canadian base metal miner delivered a letter to its rival suggesting Inmet may be trying to scuttle the bid, which is now in the hands of shareholders.
The letter, addressed to Inmet's board chairman David Beatty, said several large shareholders of Inmet had approached First Quantum to express concern that the smaller company could be shopping around a minority interest in its Cobre Panama copper project in Central America.
"These concerns are apparently based upon discussions with a senior executive officer of Inmet," said First Quantum Chief Executive Philip Pascall in the letter released to the public.
Inmet holds an 80-percent stake interest in the Panamanian project, which is one of the world's largest undeveloped copper deposits. The company has already sold a precious metal stream to help fund the $6.2 billion development.
By selling an additional stake in Cobre Panama, Inmet would make itself less appealing as a takeover target, said Pascall, implying the move was tantamount to sabotage.
Beatty described the letter as "plainly hostile and counterproductive" in a statement released on Saturday.
The company and the board "are engaged in a thorough and rigorous process to evaluate First Quantum's offer and to explore the full range of all potential alternatives that may provide greater value to Inmet shareholders, including those activities that have been commenced prior to First Quantum's bid," Beatty said.
First Quantum mailed its C$72-a-share offer directly to Inmet's shareholders on Wednesday, starting the clock on a takeover that would create one of the world's largest and fastest-growing copper-focused producers
The latest offer, first outlined in mid-December, follows an initial bid of C$62.50 put forward in October. The next month, First Quantum raised its bid to C$70.
If successful, the deal would give First Quantum control of the massive Cobre Panama project, easing its dependence on Africa and particularly Zambia.
The First Quantum offer will be open until February 14 unless extended or withdrawn, and is contingent on a minimum take-up of 66-2/3 percent of outstanding shares, along with regulatory approvals.
Nearly 40 percent of Inmet is held by four shareholders, including holding company Leucadia National Corp (LUK.N), which has backed the deal, in absence of changed circumstances.
First Quantum is being advised on the deal by Jefferies International, Goldman Sachs and RBC Capital Markets, while Inmet is being advised by CIBC World Markets.