Copper-plated mergers

The latest copper kerfuffle is exposing the flaw in most deals marketed as mergers of equals. Lundin Mining Corp. and Inmet Mining Corp., two metals miners, wanted a quiet, no-premium marriage. Now a third, Equinox Minerals Ltd., has thrown in a $5-billion hostile bid for Lundin at a 26% premium.

The earlier proposed union offered little that can't be easily trumped.

The occasional airline or utility merger of equals just might add enough value to raise real hurdles for other buyers; so too might an unbeatable geographical or strategic fit. But otherwise it's a cop-out, even if two companies are similarly sized. In the mooted Inmet-Lundin tie-up, Inmet shareholders would take just over half the new company -but there's little, if anything, in the combination that sounds impressive enough to deter an alternative buyer.

Equinox answered the call and plans a hostile offer for Lundin, having been unable to get its hands on non-public information. The new suitor is touting a pure play on the red-hot copper market, whereas the rationale for the Inmet-Lundin deal involved diversification. That such different takes exist underlines the weakness of the original merger-ofequals argument.

Not that the Equinox offer for Lundin is a slam-dunk, either. The headline premium drops to only a little more than 10% against the price of its target's shares before its deal with Inmet -they have fallen since.

Equinox may struggle to go much higher, as it is loading up with debt to fund the half-cash, half-stock offer. And in a sector with several giants stomping around, another buyer could come in -for Lundin, or indeed for Inmet.

Inmet could even do the business itself by matching the price Equinox has offered, as it is entitled to do. That would show Inmet's belief in the strategic value of combining with Lundin. But of course it would also blow the questionable mergerof-equals spin out of the water.