It is proposed that Filo be jointly acquired by BHP for BHP cash, and by Lundin Mining for cash and shares

It is proposed that Filo, a TSX-listed CBCA corporation indirectly holding a large deposit in Argentina and Chile, will be acquired by a Canadian joint venture company (JVCo) to be held on a 50-50 basis indirectly by (TSX-listed) Lundin Mining and by a Canadian subsidiary (BHP) in the BHP Group (the parent’s primary listing is in Australia). Lundin Mining holds an adjacent property in Argentina (held indirectly by a Canadian subsidiary termed “Josemaria”).

A Contribution Agreement between Lundin Mining and BHP contemplates that Lundin Mining will contribute Josemaria to JVCo for its 50% interest and BHP will contribute US$690 million in cash for its 50% interest. Furthermore, however, they will jointly purchase all the Filo shares for consideration consisting of BHP and Lundin Mining cash of around $1.908 billion and $0.859 billion, respectively, and the issuance by Lundin Mining of around 92.1 million shares. The Filo shareholders can elect to receive cash or Lundin Mining shares, subject to proration to maintain the agreed mix. All the Filo shares (including the 5% stake already held by BHP and the 0.5% stake of Lundin Mining) will also be contributed to JVCo.

The plumbing to accomplish the final structure of JVCo holding all of Filo and Josemaria in general involves:

• BHP lending both the Filo acquisition cash and JV cash to Lundin Mining and receiving the "BHP notes";
• Lundin Mining then acquiring all the Filo shares (not already held by BHP and it) for the agreed cash and share consideration;
• Lundin Mining then contributing Filo (through intermediate Canadian holding companies) to JVCo in consideration for shares and the assumption of the BHP notes; and
• BHP converting the BHP notes into JVCo shares (as well as transferring its existing 5% interest in Filo to JVCo for JVCo shares);

so that, after the dust settles, JVCo is held on the agreed 50-50 basis.

Those Filo shareholders who elect to receive Lundin Mining shares are also required to receive a nominal amount of cash ($0.0001 per Filo share), so that they can only potentially receive rollover treatment if they qualify as taxable investors and request, within 60 days of the effective date of the CBCA plan of arrangement, that Lundin Mining jointly elect with them under s. 85.

Neal Armstrong. Summary of Circular of Filo Corporation under Mergers & Acquisitions – Mergers – Shares for Shares and Cash.