(Bloomberg) -- Chinalco Mining Corp. International advanced the most on record after owner Aluminum Corp. of China, or Chinalco, offered a premium of about one third to take the Hong Kong-listed unit private. Shares in CMC, which mines copper in Peru, remained below the takeout price.
CMC jumped as much as 28 percent to HK$1.34 and closed at HK$1.31. A unit of state-owned Chinalco, China's biggest aluminum producer, offered HK$1.39 a share, a 32 percent premium to CMC's close on Sept. 14 and 34 percent more than its average price over the last 30 trading days, according to a statement from the two companies late Friday. CMC was listed in Hong Hong at HK$1.75 in January 2013 and trading was halted on Sept. 15. pending the takeover announcement.
“Investors may be expecting the offer to be rejected because it's not very close to” CMC's value at its initial public offering, said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd.
CMC's stock has since been hit by falling copper prices, which are down about 40 percent since its listing, and difficulties at its Toromocho project in Peru. The move to privatize CMC will make it easier for Chinalco to raise funds for Toromocho, which started operations in December 2013. The mine has had its revenue squeezed by weaker prices, inefficient operations and sporadic worker strikes.
“This has had a negative impact on the trading prices of CMC shares, and has also decreased the ability of CMC to raise equity funding for operations,” according to the statement.
CMC approved a $1.32 billion expansion of Toromocho in June 2013 to improve efficiency. However, “a substantial part of such future capital expenditure remains unfunded,” the companies said.
By privatizing CMC, Chinalco will be able to exercise “greater flexibility in reorganizing the capital structure of CMC and in increasing funding to CMC,” according to the statement. The proposal would “also provide current shareholders with a reasonable exit of their investment in CMC that is attractive in light of current market conditions,” the companies said.
--With assistance from Alfred Cang To contact the reporters on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net, Martin Ritchie in Shanghai at mritchie14@bloomberg.net, Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jake Lloyd-Smith
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