Bloomberg News

Quadra Shareholders to Decide on Bid Giving KGHM Global Reach

February 20, 2012

Feb. 20 (Bloomberg) -- Quadra FNX Mining Ltd. shareholders will meet to decide on a C$2.87 billion ($2.9 billion) offer by KGHM Polska Miedz SA, in the nation’s biggest bid abroad designed to deepen the Polish copper producer’s global reach.

The proposal by the Lubin, Poland-based company, with Europe’s largest mine output, is “attractive,” Quadra Chief Executive Officer Paul Blythe told Polish daily Rzeczpospolita on Feb. 16. Institutional Shareholder Services, which advises pension and mutual funds on proposals in shareholder meetings, backed the bid, Quadra said on Feb. 6. The shareholders meet today in Vancouver after Warsaw markets close.

“This is the first spectacular takeover deal by a Polish company and it’s being noticed,” said Leszek Iwaszko, a Warsaw- based analyst at Societe Generale SA. “KGHM still has a long way to go to join the world’s premier league, but this purchase will help it become a global player.”

Companies from Poland, the biggest post-communist country in the European Union, have stepped up expansion plans in the last decade, fighting for supremacy in central Europe. PKN Orlen SA bought Czech and Lithuanian refiners, Asseco Poland SA acquired software developers in most countries in the region, while Rovese SA, Poland’s largest ceramic tile producer, expanded into Romania, Ukraine and Russia.

Quadra is KGHM’s second Canadian transaction since 2010 after the company bought a stake in a joint venture with Abacus Mining & Exploration Corp. for $37 million. KGHM, which is buying miners outside Poland to cut production costs and raise output, will pay for Quadra with its own cash as it is set to report a record 11.2 billion zloty ($3.56 billion) in net income for 2011.

‘Huge Deal’

KGHM shares climbed 1.7 percent at 1:11 p.m. in Warsaw, extending their advance to 5.4 percent since Quadra’s deal was announced on Dec. 6 and valuing the Polish company at 28 billion zloty.

“It’s a huge deal for KGHM,” Tomasz Krukowski, a Warsaw- based analyst at Deutsche Bank AG said by phone. “We won’t probably see more transactions of this size as KGHM now needs to focus on efficient management of its purchased assets.”

KGHM may seek further purchases outside Poland, Chief Executive Officer Herbert Wirth told Dziennik Gazeta Prawna on Dec. 27. It is looking for companies in South Africa, Namibia and Botswana and does not rule out the purchase of copper reserves in Canada, the newspaper reported.

Quadra was created in 2010 when Quadra Mining Ltd. acquired FNX Mining Co. for about C$1 billion. The company owns the Robinson mine in Nevada, Carlota in Arizona, Franke in Chile and the Morrison and Podolsky operations in Canada’s Sudbury basin.

Its purchase will help KGHM raise annual copper output from its own deposits by 50 percent to 635,000 tons by 2018. KGHM estimates it will have 37.4 million tons of copper in deposits, more than BHP Billiton Ltd., the world’s biggest mining company, or Anglo American Plc after the acquisition, according to a presentation on its website.

--With assistance from Piotr Bujnicki in Warsaw. Editors: James M. Gomez, Elizabeth Konstantinova

To contact the reporters on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net; Pawel Kozlowski in Warsaw at pkozlowski@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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