OZ Minerals is a mining company based in Adelaide, South Australia.
OZ Minerals Ltd, takeover and profit in roughly 4 months
After negotiating an increase to BHP Billiton’s (BHP) initial indicative proposal, OZL eventually signed a binding scheme implementation agreement for an offer price of $29.00 (including franking credits). With no other bidders likely to emerge, OZL was bought for an attractive annualised arbitrage, returning members a low-risk 4.13% in roughly four months.
Current advice: Closed.
Latest Recommendation: 20th April 2023, 12:15 pm
As expected, the acquisition of OZL by BHP Billiton (BHP) was approved by the Federal Court, bringing to an end a steady and stress-free arbitrage opportunity. All up, members will return a gross profit of 4.1% in roughly four months (or around 12% annualized), and we will now cease coverage of the stock. Members are due to be paid on 2 May.
Update: 14th April 2023, 10:45 am
Not surprisingly, the acquisition of OZL by BHP Billiton (BHP) was approved by an overwhelming majority of investors (98.33%), and we now only have Federal Court approval as the remaining obstacle which is likely a mere formality. Assuming we see no surprises, OZL shares will cease trading on 18 April with payment due on 2 May.
We will provide one final update once Federal Court approval is received.
Update: 11th April 2023, 9:00 am
The scheme meeting for the acquisition of OZL by BHP for $28.25 (which includes a $1.75 fully franked dividend) is due to be held on Thursday, with proxy votes due in today. Considering OZL’s size and the very high likelihood that the deal will be approved, it is by no means essential for members to vote, but it certainly won’t hurt to do so.
To vote, please click on https://investorcentre.linkgroup.com/Login/MFASingleHoldingLogin. Once you have accessed your single holding, we recommend voting ‘FOR’ all proposed resolutions. Assuming the vote goes to plan, OZL will cease trading on 18 April and payment will be made on 2 May. Including the franking credits, members stand to return 4.1% in roughly four months.
Update: 8th March 2023, 9:15 am
OZL released the scheme booklet for the proposed acquisition by BHP Billiton (BHP) on Monday. While we have a little over a month to submit our votes, there is another pressing matter that we need to consider now. With much of the arbitrage we have invested in coming in the form of franking credits, we need to consider the ’45-day rule’ to determine eligibility for the franking credits. With a record date of 24 April, anyone buying the stock after 10 March will no longer qualify for the franking credits. To be on the safe side, we are removing our buy recommendation after the close of trade tomorrow.
Otherwise, we will provide voting advice for the scheme closer to the deadline of 11 April.
OZL announced this morning that it has entered into a binding scheme implementation agreement with BHP Billiton (BHP) which will see OZL shareholders paid $28.25 per share. This follows a one-month due diligence period and confirms the indicative offer proposed by BHP in November. One attractive addition to the offer that the board was able to negotiate was the potential for OZL to pay a fully franked special dividend of up to $1.75 per share which will come off the offer but allows for the distribution of up to $0.75 in franking credits.
OZL opened this morning at $27.85 which would translate to a gross profit of 4.1%. The scheme meeting is expected to be held in late March/early April, with payment shortly after. So, we’re looking at a holding time of 3-4 months which provides an annualized gross return of roughly 12%-16.5% when including franking credits. Considering the high likelihood that the deal completes with limited conditionality, the return is very attractive. The odds of a competing bid are low considering BHP’s financial might and the synergies BHP would enjoy given the overlap of assets near OZL’s Prominent Hill copper/gold project, so the expectation is that the investment would be an arbitrage opportunity. We, therefore, recommend members buy OZL at around $27.85 for a low-risk, short-term arbitrage investment.