Minera Andes reacts to Hochschild offer
Minera Andes (TSX:T.MAI, Stock Forum) responded Wednesday to reports that its joint venture partner in the San Jose Project, Hochschild Mining plc, had made "firm proposals" to the company for the acquisition of its 49% interest in the project or for the acquisition of all of Minera Andes' shares.
Hochschild announced Tuesday that it was making an offer to acquire all of the outstanding common shares of MAI through an-all share transaction, offering 0.22 shares of Hochschild for each share of MAI implying a value of 62 cents for each MAI Share. The company also made an alternate proposal to acquire MAI's 49% ownership interest in San José for a cash consideration equal to US$70 million, with MAI retaining Los Azules and all other exploration properties.
The company says Hochschild’s announcement “was a direct response” to Minera Andes’ news release earlier this week that Robert R. McEwen, a director and existing shareholder of the company, will purchase more than 121 million common shares of Minera at 33 cents per share, for proceeds of $40 million.
Of the proceeds, the company says US$11.3 million would be applied to fund its share of the cash call in respect of its 49% interest in the San Jose Project and US$17.5 million will be applied to repay its outstanding debt to Macquarie Bank.
Minera Andes says it received Hochschild’s proposals on February 6, after a letter agreement had been entered into with McEwen.
The company says the proposals were considered by a special committee made up of independent directors of the company, together with financial advisors.
“In effect it was determined that only by first rectifying the Corporation's financial situation and, in particular, maintaining its 49% interest in the San José Project, could the Corporation consider the Hochschild proposals and any other strategic alternative that would maximize shareholder value,” says the company. “As such, based on the advice of both advisors, the Special Committee determined, that the proposed private placement with Mr. McEwen was fair, from a financial point of view, to the shareholders of the Corporation other than Mr. McEwen,” added Minera Andes.
Minera Andes also announced earlier this week that Hochschild Mining offered an extension to March 3 of the February 17 deadline for payment of the cash call.
Minera Andes says Hochschild made a request to the TSX and OSC to reconsider the availability of the hardship exemption, upon which it was relying to complete the private placement with McEwen. The company notes that without the availability of the hardship exemption, there can be no assurance that it will be able to meet the cash call and maintain its interest in the San José Project, and repay its obligations to Macquarie.
“…the Special Committee is of the view that Hochschild's motivation in issuing its news release dated February 9, 2009 and making the related submission to the TSX and OSC is to delay or cause a termination of the proposed private placement with Mr. McEwen, in turn causing the Corporation to fail to satisfy the cash call, thereby reducing its interest in the San José Project and potentially causing Macquarie to accelerate the payment of amounts due to it or seizing the Corporation's assets all to afford Hochschild the opportunity to acquire the remaining interest in the San José Project at a depressed price, at the expense of the Corporation's shareholders,” says the company.
On the company’s Bullboard Wednesday, casey13 said:
I personally think that the Mac bailout is the best thing for us longer term. I was initially surprised by the size of the deal. The cash call was for 11 mil. after which they should be self funding. I figured the amount raised would be in the low 20 mil range. We got more dilution than I wanted but we are now on sound footing and Mac is effectivly in control. He knows how to run a gold company. So I will take the good with the bad and throw in with him. I don't think this is the end of the story here. He is a deal maker. Mergers and Aquisitions?[sic]
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