The BHP Group Ltd
(ASX: BHP) share price is under the microscope after trying to acquire OZ Minerals Limited (ASX: OZL).
OZ Minerals says that its strategy is to develop a portfolio a long-life, low-cost copper-focused assets in safe and stable countries.
BHP tries to buy OZ Minerals
According to OZ Minerals, BHP lobbed an unsolicited, conditional and non-binding indicative proposal to buy the whole business for A$25 per share in cash.
That offer represented a 32% premium compared to the last OZ Minerals share price.
The board of the ASX 200 (ASX: XJO) miner has been advised by BHP that it has accumulated an interest in OZ Minerals (through ‘derivative instruments’) amounting to an interest of less than 5%.
This offer came with a number conditions including:
- Extensive financial, legal, technical and operational due diligence over a 6-week timeframe
- Various financial assumptions
- Unanimous recommendation by the OZ Minerals board
- Agreement to a range of conditions, including no material adverse change, various regulatory approvals and so on
Deal rejected
The board decided that the proposal did not adequately compensate shareholders. The OZ Minerals Managing Director and CEO Andrew Cole said:
We have a unique set of copper and nickel assets, all with strong long-term growth potential in quality locations. We are mining minerals that are in strong demand particularly for the global electrification and decarbonisation thematic and we have a long-life resource and reserve base. We do not consider the proposal from BHP sufficiently recognises these attributes.
OZ Minerals also noted that BHP would get significant synergies from the acquisition, which it suggested are not reflected in the value of BHP’s offer.
The copper-focused business also noted that it comes at an opportunistic time when the copper and OZ Minerals share price have fallen.
BHP response
The mining giant pointed out that the offer is at a significant premium to the market value of the company, and at a price that was materially above the average broker share price target. That’s the price the broker guesses that the business will be trading in a year from now.
The BHP CEO Mike Henry said:
Our proposal represents compelling value and certainty for OZ Minerals shareholders in the face of a deteriorating external environment and increase OZ Minerals operational and growth related funding challenges.
We are disappointed that the board of OZ Minerals has indicated that it is not willing to entertain our compelling offer or provide us with access to due diligence in relation to our proposal.
Final thoughts on the BHP share price
I can definitely understand why BHP decided to attempt this takeover. Prior to the open of trade, the OZ Minerals share price had dropped 34% in 2022. Copper is one of those commodities that is expected to be important for decarbonisation in the future, so buying OZ Minerals during this dip would make sense.
However, with the rejection being so strong, it could take too big of an offer to be accepted by the leadership of OZ Minerals.
I do think that BHP is looking interesting with some of its commodities seeing weakness.
