Andrew Willis

April 28 2009

Updated Sept !0 2012




Don't hold your breath waiting for aHudBay Minerals takeover.

There's been a flurry of corporate intrigue at base metal miner in the past week, with the Globe and Mail reporting that India's Vedanta built a 9.5 per cent stake, and HudBay has TD Securities looking at strategic options.

For all this takeover smoke, the analysts put the odds of a bid for the company at just 20 to 25 per cent. That's the chance of a deal set out by Scotia Capital, TD Securities and RBC Dominion Securities in reports published on Monday and Tuesday.

While analysts are raising their target price on HudBay to reflect both Vedanta's newly-disclosed interest and the mining company's fundamentals, RBC Dominion Securities analyst Adam Schatzker cautioned: "We think there is a possibility that Vedanta will take advantage of the share price increase and sell its HudBay shares."

HudBay stock is up 63 per cent in the last three months, after a poorly-received bid for Lundin Mining was scotched, and a proxy battle saw a new board and CEO take the helm.

Any bid for HudBay by Vedanta is also expected to see the Indian mining company successfully close a $1.7-billion purchase of troubled copper producer Asarco.

"We think that the likelihood of Vedanta making a bid for HudBay without first successfully acquiring Asarco is quite low," said Mr. Schatzker. "Based on our analysis, we think the synergies that could accrue through the combined copper operations of Asarco and HudBay would be required to justify Vedanta paying more than $8.00 per share."

If Vedanta did bid for HudBay, analyst see a takeover playing out at a price of between $9 to $12 a share.