TORONTO - Shareholders of Augusta Resource Corp. (TSX:AZC) have received conflicting advice from a couple of proxy advisory firms over the future of the company's shareholders rights plan in the face of a hostile takeover bid by HudBay Minerals Inc. (TSX:HBM)
Augusta shareholders will have a chance to vote on the rights plan on May 2, three days before the expiry of HudBay's bid.
Proxy advisory firm ISS recommended shareholders vote against renewal of the rights plan.
"Certain definitions or provisions of the plan, which are critical in determining who may trigger the plan and limiting the discretion of the board, do not meet 'new generation' guidelines," ISS said.
The firm also described payment provisions in the chief executive's contract if the CEO leaves the company after it is acquired as "truly egregious" and recommended shareholders withhold their votes for the directors who sit on the company's compensation committee.
However, Augusta said proxy advisory firm Glass, Lewis & Co. has recommended shareholders support the continuation of the shareholders rights plan.
"We are pleased that Glass, Lewis & Co. supports our position that the shareholder rights plan should continue," Augusta president and chief executive Gil Clausen said.
HudBay has asked the British Columbia Securities Commission to block the shareholder rights plan before its takeover offer expires on May 5.
Augusta adopted a shareholder rights plan last year following HudBay's acquisition of a large stake in the company. HudBay said earlier this week that it currently owns more than 23 million shares of Augusta, representing a roughly 16 per cent stake.
Shareholder rights plans — sometimes called poison pill defences — make an acquisition by a hostile bidder prohibitively expensive by increasing the number of shares a company has by allowing shareholders to purchase additional shares at a substantial discount to the market price.
Augusta has said that nine potential buyers had signed confidentiality agreements and were reviewing its books.
The company holds the Rosemont copper-molybdenum project near Tucson, Ariz.
HudBay has offered 0.315 of a HudBay share for each Augusta share, valuing the company at about $404 million or $2.78 per share.
Augusta shares closed up a penny at $3.30 Thursday on the Toronto Stock Exchange, while HudBay closed up 11 cents at $8.82.