$2.6 Billion Bid on OZ Minerals

Submitted by Share Trading on 16 February, 2009 - 15:34

China Minmetals Corp., China's largest metals trading company, agreed to pay 2.6 billion Australian dollars in cash for Melbourne-based copper producer OZ Minerals (OZL). The board of the debt-laden miner decided that the offer was "in the best interest of Oz Minerals' shareholders". Coming just days after Aluminum Corp. of China said it will invest $19.5 billion in Rio Tinto Group, easing the Anglo-Australian miner's heavy debt burden, the offer underscores China's determination to clinch access to offshore mining resources.

The proposed deal will be subject to approval by Australia's Foreign Investment Review Board, which is facing strong Chinese interest in the country's resources sector. “This was the only offer we've received for the whole of the company”, Oz Minerals Managing Director Andrew Michelmore said. Oz Minerals has for months been struggling to sell assets, cut costs, raise commodity funding and refinance its debt to appease financiers who have threatened to place the company into administration.

Oz Minerals' board recommended that shareholders accept the cash offer, which values its shares at Australian 82.5 cents (53.5 U.S. cents) apiece, a 50 percent premium to their last traded price, according to a statement to the Australian Stock Exchange. "Following the rapid decline in commodity prices in late 2008, it has been a testing period for OZ Minerals, our shareholders, our financiers, our employees and our suppliers," OZ's board said in a statement Monday. This deal offers the "certainty" of cash for OZ's stakeholders. The deal could lead to Chinalco increasing its stake in Rio to 18% from the current level of 9%.

About $1.2 billion in debt is due to be refinanced on Feb. 27. On completion of the takeover, Minmetals will repay its debts, resolving Oz Minerals' “present financial issues”, the companies said. Minmetals had $20.7 billion in revenue in 2008. The company has 44 subsidiaries in 15 countries. Like Chinalco, Minmetals has ready access to financing from state-owned banks. The Oz Minerals takeover is to be financed through a long-term loan and its existing cash resources, it said. OZ Minerals is being advised by Caliburn Partnership and Goldman Sachs JBWere. Minmetals is being advised by UBS Investment Bank.