Published 11:03 AM, 6 Jun 2009 Last update 11:03 AM, 6 Jun 2009 Robert Gottliebsen
Giving OZ a chance
Late yesterday Commonwealth Bank chief executive Ralph Norris and I made contact over OZ Minerals and I have wonderful news for the OZ Minerals shareholders and board.
Ralph Norris understands that the mining and economic environment has changed dramatically since the dark days of a few months ago. He is NOT, repeat NOT, going to pull the plug on any reasonable proposition that is better for OZ Minerals shareholders than the Minmetals proposal. Top marks to Ralph Norris. This is a big break through for OZ Minerals shareholders.
Let me take you through the background. Next Thursday (June 11) OZ Minerals shareholders will be asked to approve the sale of a series of prime minerals assets to Chinese owned Minmetals for $US1.2 billion ($A1.5 billion), when Grant Samuel valued the assets, based on current metal prices, at around $1.6 billion, a $400 million transfer of wealth from Australian superannuation fund and private investor pockets to Minmetals. When Minmetals originally made the offer it was fair, but a lot has happened since.
OZ Minerals directors, led by chairman Barry Cusack and chief executive Andrew Michelmore, are recommending the ridiculously low Minmetals offer to OZ Minerals shareholders because they are frightened that the banking consortium, led by the Commonwealth Bank, will appoint an administrator if they fail to approve the sale on Thursday.
I described this problems in two commentaries, (Last chance for OZ Minerals, June 4) and (Pillaging the land of OZ, June 5). The June 3 commentary did not mention any bank by name, but the June 4 commentary mentioned Ralph Norris and the Commonwealth Bank. Both articles made it clear that there was no criticism of past actions by banks, directors or Minmetals in the previous climate.
By Thursday afternoon I heard that Ralph Norris wanted to contact me, but because of two close family funerals on Thursday and Friday I did not actually make contact with him until late Friday. We lost 24 hours and I apologise to OZ Minerals shareholders, however there may have also been an earlier conversation between Norris and Barry Cusack. .
OZ Minerals directors have The Royal Bank of Canada’s proposal before them to raise $US1 billion in fresh equity and convertible bonds. While at this stage, understandably, the Canadian proposal is non-binding, OZ Minerals directors now know that, and as long as they act properly, the rug will not be pulled from under them after the meeting on Thursday by the CBA. There are two renegade foreign banks in the consortium which are a danger but I think that is manageable.
In my view this is what OZ Minerals directors must do:
1) Forget the banks, and decide which is the best proposal for OZ Minerals shareholders. There is plenty of time to do that before the meeting.
2) If the best proposal is the Royal Bank of Canada plan then negotiate a clear timetable for the underwriters, which Barry Cusack and Andrew Michelmore must submit to the CBA.
3) I am not a lawyer and at this point I might get shot down, but I would consider adjourning the meeting to tighten the new proposal. That might risk the Minmetals deal but I don’t think Minmetals will walk away from a $400 million bonanza paper profit. They will hang in there. If they were smart they would lift their bid.
Ralph Norris was at pains to point out to me that he is not the “grim reaper” and wants to look after clients like OZ Minerals. There is actually now, theoretically, a potentially deeper problem at OZ Minerals.
Andrew Michelmore and Barry Cusack plan to go with Minmetals, so they are now being asked to act against the interests of their future employer. I have 100 per cent confidence that both men will play this game in the interests of OZ Minerals shareholders even though it might not be in their own personal interest.
They have done a wonderful job in getting OZ Minerals to this point.
But remember my first point is important. Leaving aside bank pressure, what is the best deal for OZ Minerals shareholders?
OZL Price at posting:
$8.85 Sentiment: Hold Disclosure: Held
