China's Cathay Fortune abandons Discovery Metals bid
Cathay Fortune Corporation (CFC), the private equity group founded by Chinese billionaire Yong Yu, has abandoned its A$830 million ($848 million) takeover bid for Australian copper miner Discovery Metals. Discovery shares plummeted as much as 7.5% to a five-month low of A$0.96 during morning trading in Sydney on Monday.
Yu said in a statement that the bid was being withdrawn due to concerns with information included in previous disclosures by Discovery.
This refers to a provision in the financing arrangements for Discovery's principal asset, the Boseto Copper project in Botswana, which would allow lenders to seek repayment in the event of a change of control. Yu said Cathay is "not in a position to understand and address these concerns."
In October, CF Investments, 75% owned by CFC and 25% by the China-African Development Fund (CAD), had offered A$1.70 a share in cash for all outstanding shares in Discovery, representing a 17% premium to the previous close. CFC already owned 13.7% of Discovery and, had the initial bid been accepted, its holding would have risen to 75%, with CAD taking the remainder.
The Discovery board dismissed the offer as inadequate, prompting CFC to make a direct approach to shareholders. Yu said at the time that the board's refusal to permit due diligence on "any reasonable basis" had left the CFC and CAD with no choice but to launch a hostile takeover bid.
The Boseto asset has an annual production capacity of 36,000 metric tons of copper, plus another 1.1 million ounces of silver.
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