In a decision that both sides are spinning as a victory, the British Columbia Securities Commission says that under certain circumstances, it will put an end to Augusta Resource Corp.’s shareholder rights plan by mid-July.
That would make it easier for a hostile takeover of Augusta — which is trying to win approval to build the Rosemont Mine near Tucson — unless the company can find a friendly bidder by then.
The shareholder rights plan was devised and approved by Augusta, parent firm of Rosemont Copper, last year as a way to fend off a hostile takeover bid from minority shareholder Hudbay Minerals Inc., which made just such a bid in February.
The commission decided Friday afternoon that Hudbay’s effort to put an end to the shareholder rights plan will be approved under two circumstances:
- If Hudbay extends its takeover bid for Augusta to expire no earlier than July 16. It’s now due to expire Monday after Hudbay extended its original deadline at least twice.
- If Hudbay gets any Augusta shares under the bid, and provides an additional 10-day extension, past July 16, of its takeover bid.
If those both happen, the commission will issue an order ending Augusta’s shareholders plan, effective July 15, the commission said. That will happen unless Augusta files with the commission no later than July 14 a news release saying it has terminated its shareholder rights plan, the commission said.
Earlier Friday, Augusta shareholders voted overwhelmingly at their annual meeting to continue their shareholder rights plan. About 94 percent of the votes cast approved keeping that plan, except for those cast by Hudbay, which controls nearly 16 percent of Augusta's shares. The meeting was ain Vancouver, B.C., where Augusta is headquartered.
The commission’s decision almost certainly means Augusta and Rosemont Copper need to get all of their permits from the U.S. government by mid-July to build the Rosemont Mine in the Santa Rita Mountains south of Tucson — or be much more vulnerable to a hostile takeover.
If the permits are issued by then, Augusta is much more likely to attract competing bidders who will raise the ante on what Augusta officials have called Hudbay’s “grossly inadequate” takeover bid. It amounts to $2.96 per share of Augusta stock. Hudbay owns nearly 16 percent of Augusta’s stock today.
But if the permits aren’t issued by then, Augusta may have more trouble attracting competing bidders. It may be faced with a choice of either taking Hudbay’s bid or continuing to own the mine project as its cash reserves dwindle. Without the shareholder rights plan, Hudbay presumably could more easily obtain enough shares of Augusta stock to block other takeover suitors, thereby clearing a path for itself.
In a statement headlined “Augusta announces continuance of shareholder rights plan,” Augusta interpreted the commission’s decision as a win.
“Augusta’s shareholder rights plan will continue to serve its purpose by precluding Hudbay from acquiring a minority blocking position while Augusta advances permitting for its Rosemont project and pursues strategic alternatives,” Augusta’s statement said.
“We are pleased with this outcome ... which reflects the wishes of our shareholders and allows us to continue our strategic review process,” added Gil Clausen, Augusta’s president and CEO.
But Hudbay also said it was pleased with the commission decision. That’s particularly because it followed a U.S. Forest Service announcement Thursday that it won’t meet its own deadline to respond to 101 written objections to its preliminary approval of the mine. The Forest Service said it doesn’t know when it will make a final mine decision.
“We are pleased that the B.C. Securities Commission decided to cease trade Augusta’s shareholder rights plan effective July 16, 2014 and give Augusta shareholders the opportunity to tender to our offer,” Hudbay spokesman Scott Brubacher said. “It is clear Augusta has made no progress in its attempts to secure a superior offer and it seems increasingly likely they will once again miss their permitting timelines.”