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M&A in Canada: Lundin Mining adopts poison pill after merger cancelled, czx.v, tnr.v, sgc.v,, fst.v

|Includes: BHP, FCX, LMC, RIO, Teck Resources Limited (TECK), VALE

  With Inmet it was the road into the nowhere, now Lundin Mining is still open to Equinox offer. Freeport McMoran move still could be in the cards for Lundin Mining jewel - Tenke Fungurume. It will be difficult for Lukas Lundin to defend the company with anything better than 10CAD on the table now - we will still consider that it is the very good deal for the buyer.
"Let's the bidding game begin! We have mentioned quite a few times that Tenke Fungurume is a crown jewel for any mining company with its high grade Copper and cobalt deposit. Equinox has basically confirmed it in one of the interviews by its CEO - they are going after the Tenke Fungurume stake which belongs to Lundin Mining. We should not discount the egos involved as well: Lukas Lundin was trying to buy out Equinox before and now "the table has turned" - Equinox will be the least option for him to sell the company with his name.
   How long Freeport McMoran will be waiting to enter the game?"
Lundin adopts poison pill after merger cancelled

2011-03-29 19:05 ET - News Release

Mr. Phil Wright reports
Lundin Mining Corp.'s board of directors has adopted a limited duration shareholder rights plan to enable a full consideration of strategic alternatives.
Commenting on the adoption of the rights plan, Phil Wright, the president and chief executive officer of Lundin Mining, said: "This plan has been put in place to ensure that we have adequate time to explore all alternatives to bring value to Lundin shareholders. Our exploration of alternatives starts immediately, and we will be actively and aggressively looking for the best value transaction.
"The rights plan ensures that we can do this in a considered and structured way and get the best result for our shareholders," Mr. Wright said.
In a previous Stockwatch news release earlier today, Lundin Mining announced that it has mutually terminated its proposed merger with Inmet Mining Corp. and has agreed that Inmet's right to a break fee of $120-million will be preserved in connection with the unsolicited offer of Equinox Minerals Ltd.
The board continues to recommend that shareholders reject the Equinox offer, on its own merits, for the reasons detailed in the directors circular mailed to registered shareholders on March 21, 2011, and available on SEDAR.
Commenting on the plans to pursue alternative transactions, Lukas Lundin, chairman of Lundin Mining, said: "Our hands have been completely tied in defending against the lowball, risky Equinox bid because of the Inmet agreement.
"Having agreed to terminate with Inmet, we can now pursue new alternatives to significantly improve shareholder value and get a proper premium if we do a change of control transaction.
"I am not against selling if it achieves an excellent financial return to shareholders, but I will not support selling at bargain prices," Mr. Lundin said.
Scotia Capital, as financial adviser, and Cassels Brock & Blackwell LLP, as legal adviser, will continue to assist the company in responding to the unsolicited offer announced by Equinox.
The board will make every effort to maximize value for the benefit of Lundin Mining shareholders and will update shareholders from time to time of its efforts.
Details of the rights plan
The rights plan is intended to ensure that in the context of the unsolicited takeover proposal for Lundin Mining common shares announced by Equinox, the board has sufficient time to identify, develop and negotiate alternatives to maximize shareholder value. The rights plan also seeks to ensure the fair treatment of shareholders and to provide them with adequate time to properly assess any potential takeover bid without undue pressure.
Prior to the termination of the proposed merger with Inmet, the company has been subject to customary no-shop clause obligations under the terms of the arrangement agreement with Inmet, which has rendered the company unable to seek other value enhancing alternatives to Equinox's unsolicited offer.
The board has authorized the issuance of one right in respect of each common share of the company outstanding on March 29, 2011, at 5 p.m. (Eastern Time) and each share issued thereafter. The rights will become exercisable if a person, together with its affiliates, associates and joint actors, acquires or announces an intention to acquire beneficial ownership of common shares which, when aggregated with its current holdings, total 20 per cent or more of the outstanding common shares of the company (determined in the manner set out in the rights plan). Following the acquisition of 20 per cent or more of the outstanding common shares, each right held by a person other than the acquiring person and its affiliates, associates and joint actors would, upon exercise, entitle the holder to purchase common shares at a substantial discount to the market price of the common shares at that time.
The board has the discretion to defer the time at which the rights become exercisable (which it has done in respect of the proposed Equinox offer) and to waive the application of the rights plan and/or redeem the rights if the board determines it is in the best interests of Lundin Mining to do so.
The rights plan permits the acquisition of control of Lundin Mining through a permitted bid, a competing permitted bid or a negotiated transaction. A permitted bid is one that, among other things, is made to all holders of common shares for all of their shares, is open for a minimum of 90 days and is subject to an irrevocable minimum tender condition of at least 50 per cent of the common shares held by independent shareholders. The rights plan will expire on May 31, 2011, at 5 p.m. (Eastern Time).
Although the rights plan is effective immediately, it remains subject to acceptance by the Toronto Stock Exchange. A copy of the rights plan will be available at SEDAR.
The Equinox offer
The board recommends to Lundin Mining shareholders that they reject the unsolicited offer and do not tender their Lundin Mining shares for the following reasons:
The unsolicited offer is inadequate from a financial point of view to Lundin Mining shareholders.
The pro forma debt-to-equity ratio of the combined Equinox and Lundin Mining is excessive and will present increased financial risk and a more highly leveraged capital structure than Lundin Mining and peer group companies. In addition, the lenders to Equinox will have considerable influence over the business decisions of a combined Equinox and Lundin Mining.
Substantially all of Equinox's and Lundin Mining's existing cash balances and projected near-term cash flow will be utilized to pay for: lenders fees; interest charges; and the principal repayments of the debt incurred to finance the cash portion of the consideration payable under the unsolicited offer.
The unsolicited offer would result in a company with increased exposure to geopolitical risks due to the location of Equinox assets in Zambia and Saudi Arabia.
The unsolicited offer is highly opportunistic. Equinox's shares were trading at or near the all-time-high share price when Equinox announced the unsolicited offer, which followed a news release made earlier in February, 2011, on its strategy to expand the Lumwana project. The proposed Lumwana expansion plan is not supported by mineral reserves or mineral resources and is not based on prefeasibility or feasibility studies. To date, the Lumwana mine has significantly underperformed original feasibility study projections disclosed by Equinox.
There are no strategic benefits for Lundin Mining shareholders under the unsolicited offer. The acquisition results in a company with high Africa and Middle East concentration and few, if any, synergies with Lundin Mining's business.
The board has reservations about the experience of the management of Equinox to operate a multimine company, with projects and mines spread across seven countries.
The unsolicited offer is highly conditional and has a substantial risk regarding completion without additional compensation for such risk. Conditions are subject to Equinox's lenders discretion resulting in Equinox, in many instances, not being the ultimate decision maker.
The unsolicited offer may be a violation of Section 5 of the U.S. Securities Act of 1933, as amended.
Lundin Mining's directors, officers and certain shareholders have confirmed that they will not tender their common shares to the unsolicited offer.
Shareholders do not need to take any action in response to Equinox's proposed offer at this time.
We seek Safe Harbor."
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