BY PETER ARENDAS | SEEKING ALPHA
Yesterday, Lundin Mining (OTCPK:LUNMF) and Euro Sun Mining (OTCPK:CPNFF) announced that they submitted a proposal to acquire Nevsun Resources (NSU) for C$1.5 billion ($1.156 billion), however, this offer was rejected by Nevsun’s management.
Lundin and Euro Sun offered approximately C$5 ($3.85) per Nevsun’s share. Lundin was prepared to pay C$2 ($1.54) in cash and C$2 ($1.54) in shares and Euro Sun was to pay C$1 ($0.77) in shares. As a result, Lundin would acquire all of Nevsun’s European assets, including Timok and Euro Sun would acquire all of the other assets, including Bisha.
According to the news release, this wasn’t the first offer presented to Nevsun. Lundin Mining submitted the first proposal on February 7, another one on February 25 and the third one on April 3. The offers were focused on the European assets and all of them were rejected.
As a result, Lundin Mining partnered with Euro Sun Mining that was interested in the Bisha Mine. Together, they made the abovementioned C$1.5 billion offer that was submitted on April 30. Yesterday, this offer was rejected by Nevsun.
Today, Nevsun released the reasons why it rejected the offer. According to Ian Pearce, Chair of Nevsun’s Board of Directors:
The Nevsun Board of Directors is unanimous in its belief that the Non-Binding Unsolicited Proposal fails to reflect the strategic value of our asset base. he Non-Binding Unsolicited Proposal also presents a problematic structure that could further undermine value to our shareholders.
According to the news release, the Non-Binding Unsolicited Proposal has serious deficiencies:
- Does not fully value Timok, our world-class copper-gold project;
- Has significant structural issues including C$100 million in estimated cash tax costs payable by Euro Sun, which is expected to be largely borne by existing Nevsun shareholders;
- Overvalues Euro Sun’s Rovina project, which is an unpermitted, capital-intensive ultra-low-grade asset in Romania that Nevsun had previously evaluated and determined to be highly unattractive;
- 60% of the notional consideration offered comes from shares that have historically been volatile and do not provide certainty of value; and
- Is fundamentally uncertain, as it is contingent on completion of Euro Sun shareholder approvals, waiver or expiry of a right of first refusal held by Freeport-McMoRan Exploration Company (“Freeport”), and due diligence.
SUMMARY
- Lundin Mining and Euro Sun Mining offered C$1.5 billion to acquire Nevsun Resources.
- The offer was rejected by Nevsun, as it doesn’t reflect the value of the Timok Project and it is poorly structured.
- It is possible to expect a hostile bid from Lundin and Euro Sun.
- It is possible to speculate that Freeport-McMoRan could see Timok as a replacement for Grasberg.
Thank You, Nevsun
(BY SVEN CARLIN) – Nevsun (NSU) is a stock that I have been covering for a while now and I must say it has been a wild ride but I’ve managed to properly rebalance and take advantage of market irrationalities. In the video I explain how the market was wrong on NSU or had a too short-term a view when investing in a long-term value stock like NSU.
Many probably wonder what to do now but a takeover would actually be a negative scenario as NSU will not develop Timok by itself and become a cash cow in the long term. We will see how the story ends up and whether Lundin finally manages to get its hands on Timok. Enjoy the video.
