BHP, OZ Minerals back in takeover talks
Only a week ago BHP’s Mike Henry was saying $25 was a “full and fair” offer for the copper miner, but now it has received a new takeover bid.
OZ Minerals is expected to emerge from a trading halt on Thursday to announce it has received an improved takeover bid from BHP, after China’s moves to shore up its growth plans lifted sentiment for the mining sector.
The two companies are understood to have spent Wednesday locked in talks over the terms of a new BHP bid for OZ, after the South Australian copper miner called a halt to trading in its shares ahead of an announcement of a “change of control transaction”.
The renewed move by BHP comes after a surge in the copper price over the last two weeks, on the back of China’s moves to relax its Covid-19 restrictions and offer support to its property industry – both moves seen as likely to spur demand for industrial metals such as copper.
Copper prices on the London Metals Exchange fell below $US7400 a tonne in late September, but have staged a 10 per cent rally over the last two weeks. Copper was worth $US8342 a tonne overnight on Wednesday.
OZ Minerals shares have risen with the copper price and have been trading ahead of BHP’s initial $25 a share offer for the last week, after briefly dipping below BHP’s August valuation of the company in late October.
But BHP’s return to the table comes despite the company’s mantra that acquiring the South Australian miner – which has assets in the same region as BHP’s Olympic Dam copper and gold mine – would be “nice to have, not must have”.
The OZ Minerals board immediately rejected BHP’s August 8 takeover offer, which valued the company at about $8.4bn, without engaging in further price negotiations. Despite widespread expectations BHP would pursue its target with an improved offer, BHP has taken three months to pitch a return bid.
Only a week ago BHP chief executive Mike Henry was still describing the company’s August offer for OZ Minerals as “full and fair”, but told reporters at the company’s annual shareholder meeting he remained disappointed that “things haven’t progressed with OZ”.
“We think we put full and fair value on the table with the non binding indicative offer. And that was a pretty incredible offer, an attractive offer for OZ‘s shareholders. And BHP will be disciplined about this,” he said on the sidelines of BHP’s October 10 AGM in Perth.
BHP’s conditional offer was aimed at winning access to OZ Minerals dataroom to conduct due diligence investigations, and any return to the table with the copper miner has likely been launched with a similar structure.
Shaw and Partners mining analyst Peter O’Connor said in a client note on Wednesday he believed BHP would need to pitch a revised $30 a share bid – valuing OZ Minerals at about $10bn – to kick off any engagement from the OZ Minerals board.
“To get to game point BHP may need to think closer to $40 a share,” he said.
Since BHP first approached the South Australian miner in August, OZ Minerals has sealed its deal with Havilah Resources to win access to new copper and gold project in South Australia, ticked off on a final investment decision on its West Musgrave copper and nickel project in WA, and eased analyst concerns about a stressed balance sheet by delivering a solid set of half-year results.
The company recently opened up its books to potential partners in the West Musgrave project as it looks to bankroll the $1.7bn mine.
OZ Minerals boss Andrew Cole said last month the company had seen plenty of inbound interest from both downstream nickel and copper buyers but also “peer companies” in the mining industry.
While OZ is not believed to have received an alternative to BHP’s takeover offer, miners such as Glencore – which operates the Murrin Murrin nickel mine in WA – are believed to have approached the company to look inside its West Musgrave.
Market sources say the presence of potential rivals at a project level could also have been a factor in spurring a return bid from BHP.
OZ Minerals shares last traded at $26.30. BHP shares closed up 51c to $44.45 on Wednesday.
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