OZ Minerals ‘completely in play’: Broker on BHP takeover bid

On Monday, the OZ Minerals Limited (ASX: OZL) share price was the star of the show.

The copper miner’s shares rocketed 35% higher to end the day at $25.59.

Why did the OZ Minerals share price rocket higher?

Investors were bidding the OZ Minerals share price higher after the company confirmed that it had received and rejected a non-binding takeover approach from BHP Group Ltd (ASX: BHP).

The Big Australian tabled an offer of $25.00 per share, which BHP’s CEO, Mike Henry, described as representing “compelling value and certainty” for shareholders.

However, the OZ Minerals board didn’t see things the same way. They rejected the offer on the belief that it “significantly undervalues OZ Minerals.”

What’s next?

Well, the good news for shareholders is that one leading broker believes that OZ Minerals is “still in play.”

According to a note out of Bell Potter, its analysts believe that an improved offer could be on the way from BHP or even from a second suitor. It commented:

In our view this puts OZL completely in play and, with an open register dominated by non-strategic institutional investors, we believe the chances of completion of the acquisition of OZL are high. We also believe this will be seen as an initial offer from BHP and that institutions will want to be compensated for the lack of large-cap investable copper producer options on the ASX.

In the first instance, we expect a higher cash bid from BHP as the deal makes strategic sense and offers production growth in a secure jurisdiction. We also believe the scarcity of comparable assets in comparable jurisdictions makes the chances of a competing counter-offer reasonable.

However, despite the potential for an improved bid, the broker has downgraded OZ Minerals’ shares to a hold rating with a $25.00 price target. It concludes:

[T]he risk-adjusted potential upside is insufficient for us to maintain a Buy rating and we downgrade to Hold, with a strategy to see through to completion of an all-cash acquisition of OZL by BHP or a competing bidder at the current offer price or higher.

The post OZ Minerals ‘completely in play’: Broker on BHP takeover bid appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Why Appen, Imugene, OZ Minerals, and Paradigm shares are charging higher
• ASX copper shares explode by up to 34% following BHP takeover bid
• Why is the Copper Mountain share price surging 30% on Monday?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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