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 (EVs) market.
Australia’s OZ Minerals said the A$25 per share unsolicited, conditional and non-binding indicative offer undervalued the nickel and copper miner and was “opportunistic” as it comes when copper prices and its 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 percent 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 percent to A$25.55, slightly above the offer price, after details of the deal and its rejection were made public on Monday, with some analysts saying the miner could now be “in play” from an M&A perspective.
“OZL is one of only a handful of global copper pure play companies,” Dylan Kelly, senior research analyst at Sydney-based brokerage Ord Minnett, said in a note to clients.
“This suggests another party with a more positive view on long-term copper, may be willing to pay more than BHP even if it doesn’t have an Aussie presence,” Kelly said, adding a prolonged sales process could yield a slightly higher price.
OZ did not comment on whether they have any offers from other interested parties, but said that any bids that may come through would be assessed by its board.
BHP did not say if it would make a revised offer.
OZ disclosed in its statement that BHP had acquired a less than 5 percent stake in its shares via derivative instruments.
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 underlines 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 for EVs.
The global miner 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 strategically appealing for BHP given its Olympic Dam copper hub and the Oak Dam copper discovery in South Australia.
RBC Capital said it thought BHP’s Oz bid was “compelling, and aligns with BHP’s strategy of increasing exposure toward future facing commodities”.
“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,” RBC said in its note to clients.
BHP last year looked to buy Canadian nickel producer Noront Resources but later backed out of the deal.
BHP 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”.
Earlier this year, rival miner Rio Tinto offered to buy out the 49 percent of Canada’s Turquoise Hill it did not already own for about $2.7 billion, paving the way for direct ownership of the massive Oyu Tolgoi copper-gold mining project in Mongolia.