BHP’s $9.6bn OZ bid ‘fair’ on near-record copper prices
OZ Minerals’ board is urging investors to vote in favour of the takeover at the scheme meeting in April, which will also deliver CEO Andrew Cole a $6m golden handshake.
BHP has cleared the final hurdle before putting a vote on its offer for OZ Minerals to the copper company’s shareholders, with independent expert Grant Samuel ticking off on the $28.25 a share offer as “fair and reasonable”
OZ shareholders will vote on the deal on April 11, with the company’s board maintaining its unanimous recommendation they vote in favour of the cash bid.
The independent expert report, released to the market on Friday, says the offer is fair and reasonable, putting a valuation range on OZ Mineral shares of $27.37 to $30.47 using a discounted cash flow valuation of its operating assets.
The report noted that some estimates of the long term copper outlook could lead to a higher valuation of OZ Minerals among some shareholders, particularly in light of the surge in copper prices early this year, which took the price of the industrial commodity back briefly above $US9400 a tonne.
But the report said the current copper price remain close to record highs, and were the only real basis for a valuation of OZ Minerals that was available.
Grant Samuel assumed a long term copper price of $US8500 to $US9000 a tonne in its valuation, and long term gold prices of $US1900 to $US1950 an ounce.
“Current prices for copper and nickel are at close to record highs and are well above those generally prevailing over most of the previous five years,” the report says.
“While there are clearly emerging powerful demand drivers, if sustained, high prices can be expected to elicit a range of market responses including increased production, substitution and technical innovation, that will tend to dampen future prices.”
And Grant Samuel also played down the prospects of the late emergence of a rival bid for the South Australian copper producer, noting that the OZ Minerals board had not even received an “informal” expression of interest since BHP launched its initial offer for the company in August 2022.
The report said it expected BHP to be able to generate business synergies between its Olympic Dam operations and OZ Mineral’s South Australian mines that could be worth between $3.26 and $7.72 per share in the company, but said those estimates had been made in the absence of detailed information from BHP and should be “treated with caution”.
In a letter to OZ Minerals shareholders included with the scheme documents, OZ Minerals chair Rebecca McGrath said the board had considered a range of options for the company in the wake of BHP’s initial offer, but still believed accepting the BHP bid offered the best value for shareholders.
The report also notes that managing director Andrew Cole will receive a golden handshake worth about $6m if the buyout goes ahead, with the board having agreed to vest all of Mr Cole’s long and short term performance rights on completion of the takeover.
OZ Minerals shares were up 5c to $28.06 at midday.
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