The BHP Group Ltd (ASX: BHP) share price is under the spotlight after agreeing a takeover deal with OZ Minerals Limited (ASX: OZL).
OZ Minerals is a copper-focused miner.
BHP and OZ Minerals agree takeover
BHP announced this morning that it has agreed to buy the whole business for a cash price of $28.25 per OZ Minerals share.
The takeover deal confirms the terms of the takeover that BHP announced on 18 November 2022. This was able to be agreed after a period of four weeks of exclusive due diligence.
BHP’s offer of $28.25 per OZ Minerals share means that the enterprise value is $9.6 billion. This offer represented a 49.3% premium to the closing price of $18.92 per share, which was the last trading day before the initial proposal by BHP.
BHP is going to fund this deal with existing cash and the proceeds of a new loan facility
OZ Minerals board supports the deal
The OZ Minerals board has unanimously recommended that shareholders vote in favour of the takeover deal, in the absence of a better offer.
Dividends allowed
The takeover deal allows OZ Minerals to pay a franked dividend to shareholders, of up to $1.75 per OZ Minerals share. While any dividend will reduce the cash component of the deal, it will mean unlocking franking credits for shareholders.
Management comments
The BHP CEO Mike Henry said:
The combination of BHP and OZL’s assets, skills and technical expertise provides a unique opportunity not available under separate ownership, with complementary resources including the Oak Dam exploration prospect and existing facilities within close proximity, backed by BHP’s strong balance sheet, capital discipline and commitment to sustainable development.
Final thoughts on the BHP share price and this deal
The meeting of OZ Minerals shareholders is expected to be held in late March or early April 2023. If approved, the takeover would be implemented shortly after that.
I think OZ Minerals’ assets will be a good fit in the BHP portfolio. But, the price did seem like a hefty premium, so BHP will have to be effective at extracting the value from the deal. But, it’s good to see that BHP is increasing its exposure to future-focused commodities like copper (as well as nickel and potash).
But, after a strong recent run of the BHP share price, I think that it would be better to wait until it is back below $40 again before investing.
