Minmetals drops Equinox bid
SYDNEY / SHANGHAI - Minmetals Resources Ltd withdrew its offer to buy Equinox Minerals Ltd after Barrick Gold Corp trumped it with a C$7.32 billion ($7.68 billion) cash bid.
"The price offered by Barrick is above our most optimistic assessment of value," Andrew Michelmore, chief executive officer of Hong Kong-based Minmetals, said on Tuesday. "Competing with Barrick at these prices will be, in our view, value destructive."
The withdrawal clears the path for Toronto-based Barrick to take control of the Lumwana mine in Zambia and Saudi Arabia's biggest copper deposit, in the world's most expensive copper mining takeover. Minmetals plunged in Hong Kong trading on concern it missed an opportunity to shore up copper reserves as China's demand grows.
"Minmetals had wanted to diversify its nonferrous metal businesses by adding copper assets," said Helen Lau, a Hong Kong-based analyst with UOB Kay Hian Ltd. "To become a world-class mining company, it has to do a lot of acquisitions."
Minmetals dropped 9.11 percent to HK$5.19 (68 cents) at the 4 pm close in Hong Kong, after falling as much as 13 percent. The company, controlled by State-owned China Minmetals Group, will concentrate on other opportunities and developing its own assets.
The Equinox offer by Minmetals was already China's largest-ever proposed takeover of a mining company, and the 32 percent premium over the 20-day trading average will have been the most a Chinese company has paid for a mining deal greater than $500 million, according to data compiled by Bloomberg.
"China will continue to be very prudent buyers of assets," Chris Weston, an institutional dealer at IG Markets in Melbourne, said on Tuesday. "They will be prepared to pay up for the right company at the right time."
The offer from Barrick values the Australia-based Equinox at 13.5 times earnings before interest, taxes, depreciation and amortization, a record level for a copper takeover, according to data compiled by Bloomberg.
The bid values Equinox's equity at 28 times net income, the highest for an acquisition in the industry and topping the 24 times multiple that underpinned Minmetals's abandoned proposal.
"Equinox is expensive, but nothing is cheap now," said UOB's Lau.
"Minmetals may have to wait until resource prices fall, but it's unlikely to happen anytime soon."
The deal will be the second-largest acquisition by Barrick, after its $9.93 billion purchase of Placer Dome Inc five years ago, according to data compiled by Bloomberg.
Bloomberg News
(China Daily 04/27/2011 page16)
