HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) announced that Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC) accepted its sweetened takeover bid and the two companies signed a definitive agreement today.
Terms of the deal
HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) already owns a 16% stake in Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC), and increased its offer to purchase all of the issued and outstanding shares of Augusta it does not yet own for C$3.56 per share.
The acquisition price represents a 10% premium to the initial offer of HudBay Minerals Inc (NYSE:HBM) (TSE:HBM), and a 42% premium to the closing price of the shares of Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC) on February 7, 2014.
Under its revised bid, Augusta’s shareholders will receive 0.17 of a warrant to acquire one of its common shares for every common stock of Augusta. The warrants will have an initial term of 4 years upon issuance and each full warrant will be executable for one common share of HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) at an exercise price of C$15 on the expiration of the warrants.
HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) said the revised acquisition price represents a total equity value of C$555 million based on 100% of the fully diluted, in-the-money common shares of Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC).
HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) will be able to develop the Rosemont project of Augusta Resource Corp. (USA) (NYSEMKT:AZC) (TSE:AZC) as its next mine after the acquisition. HudBay recently started two operations in Canada and its project in Peru is almost complete. Augusta estimated that the Rosemont project, which is located in the southeast part of Tucson, Arizona, represents as much as 10% of the copper production in the United States.
Augusta Resource’s mutually beneficial transaction with HudBay Minerals
In a statement, Richard Warke, executive chairman of Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC), said, “After a thorough process to consider all of our alternatives, we are pleased to have agreed on a mutually beneficial transaction representing a successful conclusion to our value maximizing process. We believe this is a fair transaction for Augusta shareholders.”
“Our agreement with Hudbay provides Augusta shareholders with an attractive premium for their shares and a stake in a growing intermediate base metals mining company with a portfolio of producing mines and development projects, including the world-class Rosemont Project,” added Warke.
On the other hand, David Garofalco, president and CEO of HudBay Minerals Inc (NYSE:HBM) (TSE:HBM), said, “We are pleased to have reached agreement with the board and management of Augusta as we strongly believe in the merits of this transaction and its benefits to both companies’ shareholders. We look forward to working with the board and management of Augusta to bring this transaction to a conclusion and to advancing the Rosemont Project within Hudbay.”
Fair offer
The board of directors of Augusta Resource Corp. (NYSEMKT:AZC) (TSE:AZC) unanimously determined that the takeover bid of HudBay Minerals Inc (NYSE:HBM) (TSE:HBM) is fair after consulting with its financial and legal advisors. The board agreed to terminate its shareholder rights plan and is encouraging the shareholders of the company to approve HudBay’s revised offer.
The directors, officers and shareholders of Augusta Resources Corp (NYSEMKT:AZC) (TSE:AZC) that controls approximately 30% of the firm’s fully diluted shares accepted the revised offer.
Jackie Przybylowski, an analyst at Desjardins Capital Markets in Toronto, said, “We are supportive of the transaction. The acquisition of Rosemont fills Hudbay’s long-term project pipeline and fits well with the company’s growth strategy.”
