BHP Group was rebuffed in its A$8.34 billion ($5.8 billion) takeover bid for OZ Minerals on Monday, in a setback as it pushes to secure copper and nickel assets for a shift into clean energy and the electric vehicles market.
Australia’s OZ Minerals said the A$25 per share unsolicited, conditional and non-binding indicative offer significantly undervalued the nickel and copper miner and was “opportunistic”, as it comes at a time when copper prices and the company’s stock price have fallen from recent peaks.
OZ is mining minerals that are in strong demand particularly for “global electrification and decarbonisation” and “we do not consider the proposal from BHP sufficiently recognises these attributes”, OZ Chief Executive Andrew Cole said.
BHP’s offer marked a 32% premium to the closing price of OZ shares on Friday, when the latter had a market capitalisation of A$6.3 billion, according to Refinitiv Eikon.
OZ shares surged 34.1% on Monday after details of the deal and its rejection were made public.
The OZ bid by BHP, the world’s biggest listed miner, is its biggest play since it sold its petroleum assets last year.
The move indicates BHP’s intention to diversify into metals like copper – essential across the energy sector for wind turbines, solar power systems and electric cables – as well as nickel that is used in lithium-ion batteries.
“We think the offer is compelling, and aligns with BHP’s strategy of increasing exposure toward future facing commodities,” RBC Capital said in its note.
“BHP has the balance sheet capacity to be able to develop all OZL’s growth projects. The key risk for OZL shareholders is whether BHP remains disciplined, as we somewhat saw with the Noront transaction.”
BHP last year looked to buy Canadian nickel producer Noront Resources but later backed out of the deal.
On the OZ bid, BHP’s Chief Executive Mike Henry said he was “disappointed that the board of OZL 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”.
WORTH PURSUING OZ?
BHP said last week it would spend more on nickel exploration over the next two years and a potential OZ deal would give it access to projects including West Musgrave in Western Australia, which has nickel-copper deposits.
OZ said BHP’s offer did not reflect the value of potential operational synergies the firms could have in South Australia and Western Australia.
OZ’s copper assets are located close to BHP’s Olympic Dam copper hub and its Oak Dam copper discovery in South Australia.
“This deal makes a lot of sense, and if BHP can still secure OZ Minerals at a price that its board is happy with then its worth pursing,” said a mining industry source, who did not want to be named as the person is not authorised to speak to media.
BHP did not say if it would make a revised offer.
OZ also disclosed that BHP had acquired a less than 5% stake in its shares via derivative instruments.
($1 = 1.4482 Australian dollars)