Glass Lewis supports poison pill strategy to blunt HudBay bid for Augusta

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The goal of Canadian base metals mining firm HudBay Minerals Inc to take over Augusta Resource Corp may just be put on hold for a while longer. This comes after proxy advisory firm Glass Lewis told its clients who are shareholders in Augusta to maintain the current shareholder rights plan, according to a report from Reuters.

On May 2, 2014, investors would cast their votes on whether to maintain or cancel the shareholder plan at Augusta. If the plan is shelved by virtue of the vote, the hostile bid of HudBay would succeed when the current plan expires on May 5, 2014.

In the business world, shareholder rights plans are termed as 'poison pills'. These plans are designed to block and make hostile takeovers difficult. Ths is done by shareholders being allowed to purchase shares at a discounted price. In this case, the move would make it expensive for HudBay to purchase Augusta shares it does not already own. Currently, HudBay owns 16 percent of Augusta.

Glass Lewis advised its clients through its report, saying that while rights plans are in general 'not conducive to good corporate governance', in this case it supports its application of the said plan in this case.

HudBay is primarily gunning for Augusta's rich copper-molybdenum project located near Tucson, AZ. The company had already sought a decision from the Canadian Securities Regulatory authorities for ways to avoid the poison pill strategy employed by Augusta.

According to Augusta President and CEO Gil Clausen, "Our intention is to put the power of this important decision int he hands of Augusta shareholders by giving them the opportunity to vote on the rights plan on May 2 three days before the expiry of HudBay's bid."

In contrast, HudBay spokesperson Scott Brubacher, through an email, said they had 'nothing to say at the present time."

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