Jinchuan will make an offer to all shareholders of Tyler at a price of C$1.60 per share in cash. The price represents a 116% premium to Tyler's closing price on October 18, 2007, the last trading day before Mercator Minerals made an unsolicited offer for Tyler. The price represents a 60% premium to Tyler's most recent closing price on January 4, 2008.
JinchuanÆs offer is subject to acceptance by at least two-thirds of TylerÆs shareholders, in value terms. TylerÆs board has recommended that shareholders accept the offer.
Tyler has been a takeover target since Mercator Minerals tabled an unsolicited bid to buy all of the company's shares in October last year, offering 0.113 Mercator shares for every Tyler share. Based on MercatorÆs closing price just before the offer commenced, the exchange ratio translated to a price of C$1.09 per Tyler share.
At the time Mercator made its bid, Tyler said that it had been led to believe that Mercator would offer as much as C$1.25 per share. Even at C$1.25 per share, Tyler felt Mercator was under-valuing the firm.
Tyler Resources is a Canadian junior exploration company focused on base and precious metals exploration in Mexico. Tyler's value lies in its primary project, the Bahuerachi property, which hosts Mexico's fourth largest mineralised porphyry deposit. Porphyry deposits contain any combination of gold, molybdenum, tungsten and copper.
Tyler is now moving towards the feasibility, development and production stage at Bahuerachi. On November 23, in a communication to shareholders, the board of Tyler recommended that shareholders ôreject the opportunistic Mercator offerö, terming it as hostile. The board said that Mercator was trying to acquire Tyler before its shareholders could realise full value for their shares through the exploitation of the Bahuerachi project.
As shareholders had pushed the share price up through October and early November in anticipation of a bidding war, the price offered by Mercator represented a 4.2% discount to the closing share price of Tyler on November 22.
Tyler appointed CIBC World Markets as financial adviser and Burnet, Duckworth & Palmer as legal adviser to represent it pursuant to MercatorÆs October offer.
While recommending the Jinchuan offer to shareholders, Alan Craven, chairman of the Tyler board of directors said in a written statement: "Jinchuan came forward with the best offer, one that provides Tyler shareholders with immediate, strong and certain value for their company and its assets.ö Jinchuan has negotiated a break fee of C$7.3 million or approximately 3.4% of the transaction value.
Jinchuan's primary activities are mining, concentrating, metallurgy and chemical engineering. It produces nickel, copper, cobalt, rare and precious metals and also some chemical products with an annual production capacity of 130,000 tonnes of nickel, 400,000 tonnes of copper, 8,000 tonnes of cobalt and 5,000 kilograms of platinum group metals.
For Jinchuan, Tyler represents an opportunity to secure supply of inputs.
The step taken by Jinchuan is in line with efforts by a number of Chinese natural resources firms. These companies are being forced to look globally to acquire mines with proven access to reserves to gain access to an uninterrupted supply of raw materials.
The deal is expected to close in mid-March and is subject to material adverse change clauses and receipt of all required regulatory approvals (including Chinese government approvals).
BMO Capital Markets is financial adviser and Davies Ward Phillips & Vineberg legal counsel to Jinchuan.