Poland's KGHM to buy Quadra FNX for C$3 billion

Tue Dec 6, 2011 3:29pm EST
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By Euan Rocha and Adrian Krajewski

TORONTO/WARSAW (Reuters) - Polish miner KGHM KGHM.WA has agreed to buy Canada-based Quadra FNX QUX.TO for about C$3 billion ($2.96 billion) in a move to boost its copper production in jurisdictions where political risk is low.

The friendly, all-cash deal will give KGHM control of Quadra's Sierra Gorda copper project in Chile, one of the world's largest copper projects still in the planning stage. KGHM would also take control of other assets in Canada, Chile and the United States.

"KGHM will benefit greatly from Quadra FNX's high-quality management team and employees, and we plan to make Canada our base for further growth in the Americas," said KGHM Chief Executive Herbert Wirth in a statement.

KGHM, one of the world's top copper and silver miners, has agreed to pay C$15 a share for Quadra - a 32 percent premium to Quadra's closing price on the Toronto Stock Exchange on Monday.

Quadra's shares jumped as high as C$16.04 following the news, as some investors and analysts expect a higher bid to emerge.


"The C$15 bid is a bit light," said Stifel Nicolaus analyst George Topping. "We're a 'buy' on the stock with a C$15.75 target price, but that's discounted from the net asset value of C$20 per share, so on a net-asset-value basis, it's a low bid."

KGHM's Warsaw-listed shares tumbled more than 10 percent following the news, as investors fretted that the deal could force the miner to scrap its dividend payout, as the miner is funding the takeover with its available cash resources.   Continued...