Analysts take new look at Equinox, Lundin

Analysts are taking a fresh look at the value of Equinox Minerals Ltd. in the wake of a surprise offer from China Minmetals Corp., China’s first hostile bid for a Canadian miner.

Late yesterday, a unit of the Chinese company said it would offer $6.3-billion for Equinox, a copper producer already caught up in a twisted saga with its own hostile bid for Lundin Mining Corp. , which in turn pulled out of a planned merger. Minmetals is offering $7 a share in cash.

Calling it a “lowball bid” today, UBS Securities Canada analysts Onno Rutten and Jo Battershill boosted their 12-month price target on Equinox shares to $8, above the bid price, from $6.80. They pegged “fair takeover value” at $8.30 a share.

“Although we see a low probability of other bids for [Equinox] emerging, we believe that shareholders could hold out for a bump by highly motivated Minmetals. Our scenario analysis supports an expected value target of $8/share for Equinox and we therefore raise our target to $8 and upgrade [Equinox] to Buy based on the implied return to the unaffected share price.”

As The Globe and Mail’s Brenda Bouw, Jacquie McNish and Tim Kiladze report today, Minmetals said it has eyed Equinox for about a year, but moved now to thwart the Equinox bid for Lundin.

Where Lundin is concerned, UBS lowered its 12-month target to $8.70 from $8.90, though it now sees a greater possibility of bids other than that of Equinox. There's also, though, a greater chance that Lundin goes it alone and remains independent.

And, they added, "we reduce our previously published takeover valuation of [Lundin] from $10.40/share to $9.50 a share to incorporate the previously underestimated tax effect of a break-up scenario. with the possible outcomes ranging from $9 to $11/share."

• China makes aggressive bid for Equinox