Investors want to block HudBay-Lundin deal

One month TSX trading in HudBay

A company that trades for seven cents a share wants to block HudBay Minerals Inc.'s takeover of Lundin Mining Corp. and instead take over HudBay itself and sell off the assets.

Jaguar Financial Corp. said it and other HudBay investors, who together own more than five per cent of HudBay's stock, want to call a shareholders meeting to replace the HudBay board and block the Lundin deal, announced Nov. 21.

The deal "is not in the best interests of HudBay's shareholders," Jaguar said in a release.

In its view, the takeover would dilute HudBay's shares by 50 per cent, "provide Lundin, a nearly insolvent company, with a cash bailout of $136 million, and force HudBay to take on debt of $240 million US."

"Swallowing Lundin would provide HudBay with an effective poison pill; however, we question whether it is legal or appropriate," said Vic Alboini, Jaguar's chief executive officer.

On Friday, after HudBay and Lundin disclosed their deal, Jaguar offered to take over HudBay for two series of notes which would be converted into cash.

Jaguar estimated one series would be worth $5.40 a HudBay share, and would be converted to cash shortly after it bought HudBay. The second series would be redeemed for cash as Jaguar sold off HudBay's assets. Jaguar would take a one per cent commission on both deals.

HudBay stock dropped Friday after the Lundin deal was announced, falling $2.07 to $3.16 in TSX trading. It rose 15 cents to $3.31 Monday.

Lundin fell 10 cents to 95 cents. Jaguar, which has traded for as much as 22 cents in the past year, lost half a cent to seven cents.