KAZ bidder ups offer and makes it final

The Kaz Minerals (KAZ) buyout saga has entered the next stage, as the bidders increased their offer to 850p plus a 27¢ (19.5p) special dividend. 

Operating as Nova Resources, Kaz’s chairman, Oleg Novachuk, and major shareholder Vladimir Kim are pushing for 75 per cent shareholder support for the takeover, but have only managed just under 60 per cent so far, including their combined 39 per cent holding.

This is their third proposal and values the copper miner at £4.1bn. The aggregate offer, including the special dividend, is 869p. Kaz has traded above the previous bid of 780p since it was made, hitting 850p in recent weeks. Investors have until 9 April to accept the new offer. 

Novachuk told Investors' Chronicle that this final offer reflected the stronger spot copper market. 

“The current offer is the maximum and most attractive level which we can offer to our shareholders,” he said. 

Copper has come into the spotlight in recent months because of a tight market and talk of a supercycle that could drive it to record highs. Kaz has two major mines in Kazakhstan, producing over 300,000 tonnes a year, and is designing a major operation in Russia, Baimskaya.

RWC Capital, which has a 3 per cent stake in Kaz, has previously said a 1,000p offer would be acceptable, based on cash profit (Ebitda) forecasts for 2021. Copper companies are looking at significantly higher profits this year because the metal is trading at around $9,000 a tonne (t), up from the $6,000-$7,000/t level seen in the second half of 2020. 

Liberum analyst Ben Davis said the 850p offer was a “relatively paltry takeover premium” on his estimated 818p price for Kaz if the buyout saga did not happen. 

Nova’s reasoning for the move has stayed consistent, saying shareholders won’t stomach the cost and risk associated with building the $8bn Baimskaya mine. 

Novachuk said copper bulls would be better off buying physical copper than investing in a mining company. “If you believe in the price, you buy copper, and you sit and wait until 2030 and you will get your gain,” he said, adding there was “huge execution risk” involved in building Baimskaya. 

The special dividend part of the deal was decided by Kaz’s board, not Nova, and Novachuk said he was not involved in the discussions. The company did not pay a final 2020 dividend because of the buyout process. 

Kaz’s share price opened above 860p and climbed to 864p in early trading.

We have previously advocated holding onto Kaz shares without supporting the takeover or selling Kaz to take advantage of the distance between its share price and the offer. Given this offer is now final, it makes the decision tougher again. Analysts largely see copper falling below $9,000/t again soon so this offer could be a good exit point, although the red metal has strong long-term prospects. We would recommend taking the deal and buying into another copper miner. 

Last IC View: Sell, 806p, 08 Feb 2021