Copper miner OZ Minerals has launched a takeover bid for Avanco that values the ASX-listed exploration firm at $444 million.
The news sent Avanco shares soaring, more than doubling to 15.7 cents, still well short of the 16.8 cent valuation the cash and share offer from OZ.
OZ wants Avanco because of its growing copper mining and exploration interests in Brazil, which, if the bid succeeds, would provide a geographic balance to its Australian copper and gold operations in South Australia.
That’s because OZ Minerals has a pre-bid acceptance deed with Appian – which with an 18.45% is Avanco’s largest shareholder – and says it has indicated support for its cash-and-scrip offer from shareholders representing 30.62% of the company.
Avanco’s board has unanimously recommended shareholders accept the proposal, which at an effective offer price of 16.8 cents per share represents a 118% premium to the last closing price of 7.7 cents.
Avanco managing director Tony Polglase said OZ Minerals strongly supported Avanco’s strategy.
"OZ Minerals’ offer is at a significant premium to recent trading levels and provides an attractive opportunity for Avanco shareholders to both crystallise value today whilst also maintaining base metals exposure through their holding in OZ Minerals," Mr Polglase said.
OZ Minerals shares were down 1% per cent, at $8.91, but rebounded to close uo 1.1% at $9.10 as investors discounted any counter bid. Avanco shares ended at 15.5 cents as investors also discounted any counter offer.
What will make it hard for a counter offer is the fact that OZ has won conditional acceptance from a big swag of Avanco shares (which won’t apply if a higher offer is lobbed).
And the bid is final, so it won’t be increased, there by ending any hope of hedge funds for an auction, and OZ’s offer is conditional on 50.1% acceptance, meaning it is willing to take control, but not total control if there are any hold outs or opposition.
One possible rival could be global giant, Glencore which has a small stake in Avanco, but it is in the midst of spending more than $US1.7 billion for Rio’s two coal mines in Queensland and bedding down its acquisition of 49% of Rio’s Hunter Valley coal mines from the Chinese group, Shenhua Australia.
The 50/50 cash/scrip consideration, comprises 8.5 cents cash and 0.009 OZ Minerals shares per Avanco share. That will cost OZ around $220 million in cash from its $700 million plus reserve at December 31.
OZ said deal would give it a major strategic foothold in two world-class mineral provinces – Brazil’s Carajás copper region and the Gurupi greenstone belt – “an operating copper mine, two study projects, range of advanced exploration projects to benefit from OZ Minerals’ capital and technical strength.”
