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Regulator orders HudBay vote on Lundin deal

23/01/09

TORONTO (Reuters) - The Ontario Securities Commission ordered on Friday that HudBay Minerals hold a shareholders meeting before it proceeds with its planned C$550 million ($440 million) takeover of fellow Canadian base metals producer Lundin Mining .

The controversial deal was challenged by dissident HudBay shareholder Jaguar Financial , which along with a small but powerful group of HudBay shareholders has criticized the all-stock deal because of its dilutive effect on HudBay shares.

Following the ruling by the OSC, Canada's major securities regulator, HudBay said it is reviewing the decision with its lawyers.

Meanwhile, its shares leaped 21 percent to C$4.27 in early trading on the Toronto Stock Exchange, regaining some of the ground lost since the takeover was announced in November.

Lundin's shares, meanwhile, plunged 27 percent to 87 Canadian cents.

Jaguar opposed the deal since it was initially unveiled, and even launched a takeover offer for HudBay as a ploy to break up the deal. Following the OSC announcement, it said it will not proceed with the offer.

HudBay said in late November would offer 0.3919 of a share for each Lundin share, which at Thursday's prices valued Lundin's stock at C$1.38 a share. Lundin shares closed on the Toronto Stock Exchange on Thursday at C$1.19.

Jaguar and other shareholders opposed the Toronto Stock Exchange's decision to conditionally approve the deal without getting the approval of HudBay shareholders.

Unlike other major exchanges, TSX rules allow for a company to issue more than 25 percent of its stock to buy a publicly traded company without shareholder approval. As part of the Lundin takeover, HudBay will double the number of shares outstanding.

A separate, but parallel, Ontario Superior Court challenge on the deal is scheduled to begin on Monday.

($1=$1.26 Canadian)

(Reporting by Susan Taylor and Scott Anderson; Editing by Peter Galloway)