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Chinese lift offer and land OZ deal

Barry Fitzgerald
June 12, 2009

A SWEETENED offer of $US1.38 billion ($A1.69 billion) for the bulk of OZ Mineral’s assets has won the day for China’s state-owned Minmetals.

Battle-weary OZ shareholders roundly endorsed the deal at a meeting in Melbourne (92 per cent approval) but not before hurling abuse at the OZ board for what they saw as its role in making the former high-flying miner a major casualty of the global financial crisis.

A big protest vote on the re-election of long-standing director Michael Eager was also recorded (42 per cent against) and the adoption of OZ’s remuneration report was defeated (62 per cent against).

All of that reflected what OZ chairman Barry Cusack said had been an “extremely stressful time” for OZ since the financial crisis hit in mid-September, prompting OZ’s banking syndicate to call in $1.1 billion in debt.

Minmetals project director Mark Liu said after the meeting that the group’s decision to increase the offer demonstrated “goodwill, not only to OZ shareholders but to the Australian public as well”. It comes as the uproar in China continues over Rio Tinto’s spurning of a refinancing deal with state-owned Chinalco.

Minmetals’ original deal was struck in February. Like the Rio Tinto deal before it, it was essentially a refinancing package for the debt-heavy OZ. But it had become unpalatable because of the strong improvement in commodity prices and equity values since.

Last Friday, OZ received two refinancing alternatives, one from RFC and Royal Bank of Canada and one from Macquarie. Both were rejected ahead of yesterday’s shareholder meeting because they lacked, among other things, the certainty OZ was looking for as its June 30 debt repayment deadline loomed.

It was revealed yesterday that Minmetals had been in talks with OZ for about three weeks on increasing its offer to take account of the improved market conditions. The improved deal was agreed to at 8pm on Wednesday night and announced by Minmetals at 10pm, leaving OZ to tell shareholders of the improved offer at the meeting.

OZ said that unlike the competing proposals (Macquarie pulled its bid at 6pm on Wednesday), the new deal with Minmetals was a complete solution to its debt woes.

The only condition was that shareholders approve the deal at yesterday’s meeting.

OZ emerges from the deal sporting close to $800 million in cash and with its portfolio of interests reduced to some exploration assets and the Prominent Hill copper/gold mine in South Australia.

Mr Cusack said OZ would be cautious in how it spent its cash. “Having just come out of a life-threatening experience, we want to make sure that we don’t fall back into one,” he told shareholders.

http://business.theage.com.au/business/chinese-lift-offer-and-land-oz-deal-20090611-c4zi.html

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