February 28, 2011 / 10:30 PM / 7 years ago

UPDATE 1-Lundin CEO sees no strategic benefit in Equinox bid

* Says Lundin-Inmet combination is “vastly superior”

* Sees combination with Equinox as too risky

TORONTO, Feb 28 (Reuters) - Lundin Mining (LUN.TO) Chief Executive Phil Wright said on Monday he sees no strategic benefit in Equinox Minerals’ EQN.AX unsolicited C$4.8 billion ($5 billion) takeover bid, saying that Lundin’s proposed tie-up with Inmet Mining IMN.TO is a superior proposal. [ID:nN27203451]

“What are the possible strategic operational benefits that come from a combination with Equinox? I’ve looked and I see zero. If they’re there, they’re eluding me at this stage,” said Wright, while addressing the BMO Metals & Mining Conference in Florida.

“If you ask me in terms of portfolio combination which is the better portfolio, Lundin-Equinox or Lundin-Inmet, then unequivocally, without focusing on the value issues, I can say that I think the Lundin-Inmet combination is something that is vastly superior,” he said.

Notwithstanding his comments, Lundin said his company’s board will review the Equinox bid and issue a recommendation to shareholders soon. It has advised investors not to act on the Equinox bid at this time.

Equinox’s cash and stock bid, worth C$8.10 a share, comes about a month after Lundin and Inmet agreed to join forces to form a Canadian copper mining major called Symterra, worth about C$9 billion. Shareholders of both Lundin and Inmet are due to vote on that deal on March 14.

Inmet CEO Jochen Tilk, who was making a joint presentation along with Wright at the event, said he strongly believes that Inmet’s proposal is a superior transaction.

TOO MUCH RISK

Wright noted that a tie-up with Equinox would result in a vast majority of the combined company’s assets being located in Africa. A move that he thinks would expose the company to too much geopolitical risk.

In addition, Wright argued that Equinox’s plan to take on $3.2 billion in debt to finance the cash component of the deal is dangerous given the volatility of global commodity markets.

Equinox is offering C$8.10 in cash for each Lundin share, or an alternative offer involving 1.2903 Equinox shares plus one Canadian cent for each Lundin share.

There is a maximum cash consideration of about C$2.4 billion and a limit on the Equinox shares issued of around 380 million. This implies a 50:50 split between the cash and stock payout that Lundin shareholders will receive.

“If Equinox is so happy that the market loves its stock, why not do an equity issue and make it an all-cash bid, which makes it a much easier situation for our shareholders to contemplate,” Wright said.

“From my point of view, do you want to be in the hands of your lenders?” he asked. “Have we learned nothing from the past three years?” ($1=$0.97 Canadian) (Reporting by Julie Gordon and Euan Rocha; editing by Peter Galloway)

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