HudBay Minerals (TSX: T.HBM, Stock Forum) announced Friday that the Ontario Securities Commission has set aside a decision by the TSX which granted conditional approval for the listing of HudBay shares issued in connection with its proposed acquisition of Lundin Mining Corporation (TSX: T.LUN, Stock Forum).
The OSC’s decision follows an application brought by HudBay shareholder Jaguar Financial Corporation (TSX: T.JFC, Stock Forum), requesting that the commission review a TSX decision from December 10, which did not impose a condition requiring that the transaction - the listing of the additional common shares of HudBay issued in connection with the deal between HudBay and Lundin - be approved by HudBay shareholders.
The OSC determined that HudBay shareholder approval of the acquisition of Lundin is required as a condition to the listing of the additional common shares of HudBay, and has prohibited the company from issuing any securities in connection with the acquisition without having first obtained approval of a majority of HudBay shareholders.
“The Transaction will result in the issue of additional HudBay common shares representing just over 100% of the number of HudBay shares currently outstanding. That means that the former shareholders of Lundin will own approximately 50% of the shares of the merged entity following completion of the Transaction. That level of dilution is extreme,” said the OSC.
The OSC concluded that “the economic consequences of the Transaction on the shareholders of HudBay are extreme,” and concluded that “permitting the Transaction to proceed without the approval of the shareholders of HudBay would be contrary to the public interest.”
HudBay says it is reviewing the OSC decision with its legal advisors.
Jaguar also announced Friday that it will not proceed with an offer to acquire all of the issued common shares of HudBay as announced on November 21.
It cites that the reasons include the OSC’s decision, as well as “the convened HudBay shareholders meeting for March 31, 2009, as a result of a requisition made by a HudBay shareholder to replace the HudBay board of directors.”
On the Lundin Bullboard Friday, Bunyakkk offered the following thoughts:
Well it looks like it is now going to a vote with Hudbay shareholders also and as we know there is a huge amount of them who do not like this merger. So, if it doesn't go through and there is a very good chance that it will not, where does that leave us Lundin shareholders. First, Hudbay now owns 20% of Lundin, paid $138 million and that is not going to be refunded. So we have some cash on hand. Two, Lundin has sold the Aljustrel mine in Portugal and although they have really played this down and not said how much they'll receive in cash, they will get something for it. So more cash on hand. At the end of last quarter they had about 100 million in cash. So is this enough for them to survive without the Hudbay deal??????? And for how long. What other options might they have. Or are we headed for a bankruptcy like Nortel. I mean if they can declare bakruptcy with 2 billion in cash then I guess anyone can at any time. Of course Lundin said they were in debt to the tune of 195 million last quarter.
Shares of Lundin Mining tumbled 24.4% to 90 cents, while HudBay Minerals climbed 21.6% to $4.28 Friday.
