OZ Minerals’ recent $418 million takeover offer for Brazilian-focused copper-gold company Avanco Resources has been referred to by some Avanco shareholders, primarily commenters from the company’s second-biggest investor, London-based Greenstone Resources (16.68 per cent), as undervalued.
Greenstone invested $22.6 million into Avanco (plus an additional $6 million rights offering) for 15 per cent of the company in 2015.
In a recent interview with the Australian Financial Review, Greenstone senior partner Mark Sawyer stated that “the current offer significantly undervalues the attractive pipeline of projects currently owned by Avanco”.
OZ is Avanco’s biggest shareholder, having entered into a pre-bid acceptance deed for UK-based fund Appian Natural Resources’ 18.45 per cent share in the Brazilian junior.
Third-biggest owner Blackrock (11.6 per cent) has also agreed to sell, along with several minor investors, putting OZ’s preliminary ownership in Avanco at just over 35 per cent currently — the company requires 50.1 per cent ownership for the takeover deal to proceed.
Conversely, should the bid succeed Avanco shareholders will own up to 7.3 per cent of pro forma shares in OZ Minerals. The board at Avanco has unanimously recommended shareholders accept the proposal, which recently saw its deadline extended to June 1.
Arguably, Avanco’s most high-profile investor is Glencore, however, which holds an 8.27 per cent share in the company and is yet to comment on OZ’s offer.
OZ established its initial offer in March for Avanco shareholders to receive 8.5 cents in cash and 0.009 OZ shares for every Avanco share to the value of $418 million; Avanco’s shares were priced at 17 cents each as part of the deal, a 121 per cent premium on the company’s share price prior to OZ Minerals’ announcement.