BHP boss Mike Henry underlined the mining giant’s determination to increase its presence in so-called commodities of the future with a rejected $8.4 billion bid for OZ Minerals.
Shares of OZ jumped $6.67, or 35%, on Monday to close at $25.59, more than 2% above BHP’s offer price of $25 after the miner Mid-tier copper rejected BHP’s takeover bid.
The share price reaction suggests that BHP will have to sweeten its offer or that a competing bidder could emerge.
BHP’s offer represents a 32.1% premium to OZ’s last traded price of $18.92 on Friday, which the mining giant said was significantly above brokers’ average price targets for the stock. .
But OZ said its board unanimously determined that the indicative proposal significantly undervalued the company and was not in the best interests of shareholders.
BHP has made no secret of its desire to seek growth in so-called future commodities, identifying copper, nickel and potash as the key to the world’s future.
For BHP, OZ’s Prominent Hill and Carapateena mines in South Australia would offer synergies and growth options for the mining giant’s Olympic Dam copper mine and Oak Dam copper project. Meanwhile, OZ’s advanced West Musgrave nickel project in remote Washington state would provide feed ore for its growing Nickel West business.
BHP chief executive Mike Henry said the company’s proposal represented compelling value and certainty for OZ shareholders in the face of a deteriorating external environment and increasing funding challenges related to operations and growth.
“We are disappointed that the OZ board has indicated that they are unwilling to accept our compelling offer or provide us with access to due diligence regarding our proposal,” he said.
OZ chief executive Andrew Cole said the company has a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations.
“We mine minerals that are in high demand, particularly for the global theme of electrification and decarbonization, and we have a long-lived resource and reserve base,” he said. declared.
“We do not consider that BHP’s proposal sufficiently recognizes these attributes.”
BHP informed OZ that it had acquired a small stake in the company (less than 5%) via “derivative instruments”. His conditional offer is subject to OZ opening its books for a six-week due diligence period.
OZ is eyeing an expansion of its Prominent Hill mine, a new Block Cave mine in Carapateena and a final investment decision later this year on the West Musgrave development.
OZ called BHP’s offer “very opportunistic” given that the price of copper and its share price are well below the highs reached earlier in the year.
However, Ord Minnett analysts said they were disappointed with BHP’s offer, mainly because the company could have secured the assets for significantly less a few years ago.
They noted that OZ had regularly traded below $12 per share before 2020 and then released “study after study of its growth plans,” which forced investors to reassess the stock.
But RBC Capital Markets analyst Kaan Peker said the offer was compelling and aligned with BHP’s strategy of increasing exposure to forward-looking commodities.
He noted that BHP’s large financial clout meant it could develop all of OZ’s growth plans simultaneously, which analysts have previously said could weigh heavily on the Adelaide-based company’s balance sheet.
BHP’s bid for OZ represents the mining giant’s second takeover attempt in the so-called forward-looking commodities sector in the past year.
Around this time last year, BHP launched a failed takeover bid of Canadian nickel company Noront Resources, which resulted in a bidding war with Andrew Forrest’s Wyloo Metals, which the latter eventually won.
OZ’s offer follows the merger of BHP’s oil business with Woodside and its decision to unify its London and Australia-based corporate structure under a single entity.
Copper is expected to play an increasing role in the electrification of the planet, while nickel is an essential ingredient in batteries for electric vehicles.
S&P Global predicted last month that global copper demand would double from 25 Mtpy to 50 Mtpy by 2035, while the International Energy Agency estimated that the world would need 60 more nickel mines. here 2030.