Minmetals' Canadian bid gets tougher
China Minmetals Corp faces even tougher negotiations if its proposed US$5.5 billion takeover of Canadian mining company Noranda is to succeed, after the deadline for exclusive talks between the two companies expired and Noranda invited fresh bidders.
Minmetals' request for extending the exclusive negotiations was denied by the Canadian miner on Monday, ending slightly more than two months of exclusive talks. Noranda had already extended the deadline once.
'In deciding not to extend the period of exclusivity, the [company] was mindful of the current positive metal prices, the global economic environment for commodities, the strong operational performance being achieved in the company and the company's recent exploration successes,' Noranda said in its announcement on Tuesday.
The price of copper and nickel have held firm over the past two months amid growing optimism about the outlook for metal prices.
Unsatisfied with the 'small premium' over market price that Minmetals was offering for Noranda when the exclusivity agreement was signed on September 24, Noranda is now inviting interested bidders for talks.
While continuing talks with Minmetals on a non-exclusive basis, Noranda said it had 'the opportunity to progress with other alternatives, both on a stand-alone basis and with other parties'.
A source involved in the deal said Noranda was trying to pressure Minmetals into offering a higher price.
'This is a very common tactic for any [mergers and acquisitions] talks. That way the seller can put pressure on the buyer,' the source said.
Minmetals is offering just over US$4 billion in cash to Noranda's shareholders in exchange for 100 per cent of the company. On top of the cash, Minmetals proposed to spin off Noranda's aluminium business and redistribute the shares to Noranda's existing shareholders.
The total value of the deal is about US$5.5 billion.
Minmetals reiterated that it remained 'very interested' in reaching an agreement with Noranda, but a company spokesman said it would take time to execute the transaction because of the complexity of the deal.
'We would prefer to have been able to complete our discussions with Noranda within the period of exclusivity but that did not prove possible. We are continuing our discussions nonetheless and are hopeful we can reach an agreement,' the spokesman said.
Meanwhile, analysts expect an earlier suitor, Brazil's Companhia Vale do Rio Doce, the world's largest iron ore miner, to still be interested in buying Noranda.
Minmetals is not only facing competition for Noranda, it is also facing pressure from Canadian lawmakers, who have cited human-rights abuses in China as a reason for blocking the deal.
