Minmetals raises bid to seal OZ Minerals deal

12 June 2009

China Minmetals raised its offer by $180 million to acquire the bulk of the assets of OZ Minerals after both its rivals dropped out of the bidding, a strategy hailed as a 'very smart move' by analysts. The move, ensured that shareholders would vote in favour of the transaction and thereby helping it seal the deal yesterday.

Minmetals actually did not need to increase its $1.2-billion offer as the risk that OZ's bankers would otherwise put the company into receivership would have weighed-in in Minmetals favour in shareholder calculations.

But OZ and Minmetals probably wanted to take no chances on possibilities like the appearance of new contenders given the institutional shareholders not committing their intentions.

Rival bidders had sought to point out that Minmetals was getting the OZ assets at a bargain basement price. They said that Mimmetals would be getting the assets at $200 million – $400 million which fell short of independent expert Grant Samuel's estimate by $245.8 -$491.5 million.

Though yesterday's final result – 1.3 billion votes for and only 107 million against, i.e. 92.5 per cent in favour may seem to indicate that there was nothing to worry about but there were some possibilities that could have spoilt the game for Minmetals, analysts say. Though the risks were always slight, Mimetals was keen to clinch the deal and by increasing the offer it finally sealed the deal in its favour.

According to analysts Minmetals' move also helped it win a measure of goodwill from Australian shareholders. The Chinese company is keen to be a good corporate citizen in Australia and seen to be so in the eyes of Australians. Had it chosen to capitalise on the existing deal, a perception would have remained that the company took advantage of OZ's strained financial condition to snap up the assets way below their actual value.