December 6, 2011 / 5:14 PM / 7 years ago

UPDATE 3-KGHM to buy Quadra FNX for about C$3 bln

(Wraps KGHM-Quadra stories, adds quotes from KGHM CEO and Polish treasury, updates prices)

* KGHM to acquire Quadra for C$3 bln, or C$15 a share in cash

* Offer values Quadra at a 32 pct premium to last close

* Quadra shares jump, while KGHM dive

By Euan Rocha and Adrian Krajewski

TORONTO/WARSAW, Dec 6 (Reuters) - Polish copper miner KGHM has agreed to buy Canadian rival Quadra FNX for a hefty premium, targeting the world’s No.4 spot by expanding its asset base in politically safe mining jurisdictions.

KGHM shares tumbled by over 10 percent on the news on Tuesday, while Quadra jumped beyond the C$15 per share KGHM agreed to pay — a premium of a third over the target’s market price before the news, indicating some investors expect a higher bid.

The zloty’s decline also accelerated after the news amid expectations of additional supply of the Polish currency on the foreign exchange market.

“The price KGHM is paying is quite a lot higher than the target’s market price, and secondly these assets are not of the highest value. The argument is that spending 10 billion zlotys will mean there will be a lot less money for a dividend,” said Tomasz Duda, analyst at Ipopema Securities in Warsaw.

Analysts also fret about KGHM’s dividend plans, as at current currency levels the C$3 billion ($3 billion) price for Quadra almost equals the Polish state-controlled miner’s target net profit of 9.6 billion zlotys ($2.9 billion) this year.

KGHM Chief Executive Herbert Wirth tried to reassure investors by saying there were no plans to scrap the dividend payout from 2011 profit, capping KGHM’s share price fall at almost 6 percent.

“I think there will be a dividend, and it will be a fair one,” Wirth told TVN CNBC channel in an interview, adding the management’s proposal for the payout should come in the range of 30-50 percent of the company’s 2011 profit.

KGHM expects the takeover of Quadra, which owns copper mines in Canada, Chile and the United States, to be clinched in the first quarter of 2012 and boost its output by 25 percent or 100,000 tonnes in 2012, and possibly by 50 percent ultimately.

“(KGHM’s) overall copper deposits will grow by over 8 billion tonnes of copper, or 28 percent, placing KGHM at No.4 in the world,” the Polish miner said in a statement.

For the July-September period, the Vancouver-based miner earned $142.8 million, up from a year-ago profit of $19.5 million. Its total copper production in the quarter was about 60 million pounds.

CEO Wirth added the plan was to temporarily delist Quadra from the Toronto bourse.

Quadra said the deal was worth a total of about C$3.5 billion, including US$500 million in debt. ($1 = 1.0131 Canadian dollars) ($1 = 3.3006 Polish zlotys) (Additional reporting by Agnieszka Barteczko in Warsaw; Editing by Will Waterman)

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