Hudbay may settle warrants on its common shares by delivering shares equal to their in-the-money value

In July, Hudbay acquired most of the common shares of Augusta Resources, and issued 0.315 of a Hudbay common share and 0.17 of a warrant to acquire a Hudbay common share in consideration for each Augusta share.

The current second stage squeeze-out transaction was complicated by the need to provide the same warrant consideration. On an amalgamation of Augusta with a Newco grandchild Hudbay subsidiary, the minority Augusta shareholders will receive Hudbay common shares and redeemable preference shares of Amalco (having full stated capital). These prefs will be redeemed immediately by the delivery of Hudbay warrants.

The tax consequences to a warrantholder of Hudbay electing, following exercise by the warrantholder, to settle the warrants by issuing Hudbay common shares equal to the warrants’ in-the-money value, are unclear both in Canada and the U.S.

Neal Armstrong. Summary of Augusta Resource Circular under Mergers & Acquisitions – Subsequent Acquisition Transactions – Amalgamations – Shares and Warrants.