OZ Minerals Limited surges on takeover speculation: what you need to know

The market is betting that KKR wants more than just a minority stake in OZ Minerals Limited (ASX:OZL) with the stock surging above KKR's offer price of $3.60 for a 10% holding in the copper miner.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Just watch OZ Minerals Limited (ASX: OZL) fly! The stock surged 12.1% this morning to a three-week high of $3.71 on takeover speculation.

This is above the $3.60 offer price that private equity firm Kohlberg Kravis Roberts (KKR) offered for a 10% stake in the copper miner after the stock crashed by more than 20% since May on the back of the commodity rout.

KKR upped its offer by 5 cents a share overnight and is believed to already own a less than 5% holding in OZ Minerals, according to the Australian Financial Review.

The news, follows a stunning 4% rally in the copper price to $US2.3410 a pound overnight as shares in Swiss commodities giant Glencore bounced for a second day. The share sell-off on Monday triggered a global market meltdown.

The copper price is also supported by reports that Chile's second largest copper mine Collahuasi announced that it will cut production by 30,000 tonnes.

The opportunistic move by KKR will bolster confidence towards the mining sector at a time when investor confidence towards the sector has hit a multi-year low on fears that there is too much supply of most hard commodities at a time when appetite from the world's largest commodities consumer China is waning.

KKR described OZ Minerals as a good undervalued company in an emailed statement reported on Bloomberg and OZ Minerals said it has no idea what KKR's intentions were.

But if you are hoping for an imminent takeover bid for OZ Minerals, you may have to be more patient as there are reports that KKR is not intending on making an offer for the $1.1 billion market cap miner anytime soon.

However, private equity firms are not known to make strategic investments in companies where they do not control a majority stake and I don't think KKR will look to sit on its minority stake for long.

OZ Minerals is in play and this will put pressure on its board to find ways to keep its share price buoyant as that is the only way to keep corporate raiders at bay.

The takeover specuation is spilling over to other copper miners too. Sandfire Resources NL (ASX: SFR) is up 7.3% to $5.78 this morning while Talisman Mining Ltd. (ASX: TLM) is 5.3% higher at 40 cents.

This isn't the first notable corporation action among copper miners. PanAust Ltd was taken out by its major shareholder Guangdong Rising Assets Management in May this year.

Expect more corporate interest among mining stocks as valuations in the sector are very low as the market refuses to believe that commodity prices will ever recover.

KKR's move reminds us all that there is value in the sector as long as investors have an investment time horizon that extends for more than six months.

Motley Fool contributor Brendon Lau has no position in any stocks mentioned. Follow me on Twitter - https://twitter.com/brenlau Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »