In the wisdom of the board and management of Mines Management, Inc. (NYSEMKT: MGN), the company is worth about $30 million. The Mines has reached an agreement to sell itself to Hecla Mining Company (NYSE: HL). But nothing is final until regulators and Mines shareholders approve the transaction. Will they?
When you look at the value Mines Management, Inc. (NYSEMKT: MGN) is being offered in the deal it doesn’t look bad at all. Shareholders of Mines will surrender their stake in Mines for 0.2218 of a share in Hecla for every whole share of Mines the own. For background, Hecla shares carry a higher value than Mines shares, so when you do the math, it works out to a valuation of $30 million for Mines. Appreciation of Hecla shares in the intervening period means that shareholders of Mines could walk away with a larger value when the transaction finally closes.
The incentive in the deal
The swapping of Mines Management, Inc. (NYSEMKT: MGN) shares for shares in Hecla seems to carry some incentives for Mines shareholders. That is particularly true if you consider the possibility of Hecla stock gaining in the period leading the closing of the deal. If you factor that incentive, you see a strong chance that Mines shareholders will not hesitate to give their nod to the merger.
However, the area of great uncertainty is approval from the regulators. Antitrust issues don’t seem to linger around the deal, but environmentalists can complicate the matters.
What are Mines Management, Inc. (NYSEMKT: MGN)’s executives saying?
Neither executives of Mines Management, Inc. (NYSEMKT:MGN) nor Hecla directly addressed regulatory risks in the proposed marriage. What they tried to bring out was the mutual benefits for the two companies when they combine. For example, Mines CEO, Glenn Dobbs, seemed to suggest that Mines had done its part on projects exploration and Hecla was well-suited to drive the next phase which is production.
One his part, Hecla’s CEO, Phillips S. Baker Jr., said that his company was the perfect partner for Mines. Baker brought up the issue of the proximity the two companies’ projects as a compelling reason the merge makes sense and is possible irresistible.
Mines Management, Inc. (NYSEMKT: MGN)’s Montanore deposit, which Hecla will inherit when the transaction goes through, is estimated to contain 2 billion pounds of copper and 230 million ounces of silver.