Atlas ups stake in Carmen Copper to 100%

Atlas will make Carmen Copper a 100% subsidiary and plans to induct a new strategic investor after buying out its private equity partner, Casop.
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Atlas's copper mine in Lutopan, Philippines
<div style="text-align: left;"> Atlas's copper mine in Lutopan, Philippines </div>

Atlas Consolidated Mining and Development will shell out $368 million to make Carmen Copper a wholly owned subsidiary, buying out the 45.54% owned by Casop, its private equity partner.

Atlas, which is based in Manila, also told the Philippine Stock Exchange on Friday that it will raise $390 million through a combination of debt and equity to finance the acquisition. BDO Capital and Investment and Evercore Partners are advising Atlas on the acquisition and the fundraising.

Atlas is an integrated resources company that has been in business since 1935. It is primarily engaged in copper and nickel mining, but also earns revenue from water supply. The company’s Toledo copper mine started production in 1955 and was once the world’s third-biggest copper producer. Atlas also has a nickel project in Palawan and a portfolio of mineral interests. In 2005, it restructured its assets to transfer the copper mine into a new company, Carmen Copper and also created three other subsidiaries, Berong Nickel, Aquatlas, and Atlas Exploration. Atlas Exploration is charged with developing the portfolio of copper, gold and nickel exploration projects. Atlas is owned and managed by the Ramos family.

In May 2006, Atlas raised $40 million from Crescent Asian Special Opportunities Portfolio (Casop), a Singapore-based special-situations fund, by selling a 34% direct equity stake, convertibles and some debt on Carmen’s books. Casop subsequently exercised its right to convert and upped its stake to 45.54%. On the back of the capital infusion by Casop, Carmen raised a $100 million debt facility from Deutsche Bank, guaranteed by Philippines Exim, enabling it to invest in new equipment and ramp up production. Atlas subsequently refinanced the Deutsche loan with a facility from local bank, Banco de Oro Unibank.

Carmen has been reaping the benefits of improved copper demand and had a good first quarter, contributing to a five-fold growth in Atlas’s net income.

Atlas shares have traded higher recently as investors in the Philippines had been expecting the company to buy out Casop and name a new strategic partner. As speculation intensified last week, the shares gained 20% to touch a four-year high of Ps20.15 ($0.46).

On Friday, in response to the price movement, Atlas management suspended its shares from trading ahead of an official announcement that it was buying out Casop and raising new capital in Atlas at a price of Ps19.56 per share, representing an 8.5% premium over its 30-day average price.

Atlas did not disclose the source of the equity, saying in its stock exchange filing that it would be from “a supportive investor whose substantial financial resources and market prominence will enhance Atlas’s ability to access capital markets”. Atlas also said the two-stage deal — buying out Casop and raising capital — would increase Ebitda by 84%.

Names being bandied by local media in the Philippines as potential investors include local tycoons Manuel Pangilinan and Henry Sy. Some sources said a strategic investor with a background in mining was also an option. However, those negotiations are not yet completed as the announcement of the buyout was brought forward in response to the surge in Atlas’s share price

Atlas has a board meeting scheduled today, when it is expected to release further details.

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