European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

KAZ Minerals: Sweetened Offer but Maybe Not Convincing Enough

Event-Driven

On 26 March, the last day to revise the previous bid under UK takeover rules, <a href="https://www.kazminerals.com/en/repository/news-container/news/2021/final-increased-cash-offer/" target="_blank" rel="noopener">Nova Resources increased its offer</a> from 780p to 850p for the 60.62% of <a href="https://www.smartkarma.com/entities/kaz-minerals-plc" target="_blank" data-smartkarma-citation="entities:21999:1" rel="noopener">KAZ Minerals (KAZ LN)</a> it does not already own, the offer includes a special dividend of $0.27 subject to the final increased offer becoming unconditional.
<ul>
<li>The Final Increased Offer represents an aggregate amount of 869p, according to the release.</li>
<li>The financial terms are final and will not be increased.</li>
<li>That is the second increase to its original offer, and it represents a 33% vs. the first offer.</li>
<li>The improved offer values the equity of KAZ at £4,012 mn (not including the special dividend), and 4.8x EV/21e EBITDA (vs. 5.6x for the initial offer, the Capital IQ consensus 2021e EBITDA has since been revised upwards by c. 26%). It is also a 4.5% discount to the median Ind. NAVPS (Capital IQ consensus).</li>
</ul>
In my 5 February Insight (<a href="https://www.smartkarma.com/insights/kaz-minerals-sweetened-offer-but-maybe-not-convincing-enough" target="_blank" data-smartkarma-citation="insights:47800" rel="noopener">KAZ Minerals: Sweetened Offer but Maybe Not Convincing Enough</a>) I had mentioned that the 4 February sweetened offer was not final and that an improved offer could come and would take into account the lower end of what investors estimate Baimskaya is worth, an equity value of 846p.
Chinese demand is contributing to the copper price increases. The spot price of copper reached a 5-year high on 25 February 2021 of $9,456/t.
Deadline to accept the offer is 13.00 (London time) on 9 April, two weeks from now, which translates the pressure to either accept the improved and final offer (a good return from the first offer) or let it lapse and trust Chinese demand will keep on pushing copper prices.
In the absence of any material change, I believe this is it (and a good run from the initial offer). Kim and Novachuk will have the company for themselves (with its commodity and political risks) and shareholders have (fairly) grabbed a 33% increase (part of the future FCF from Baimskaya). Recommendation is Long KAZ TP 869 and tender. Gross spread is 0.57%, or c. 2.3% annualized.

On 26 March, the last day to revise the previous bid under UK takeover rules, Nova Resources increased its offer from 780p to 850p for the 60.62% of KAZ Minerals (KAZ LN) it does not already own, the offer includes a special dividend of $0.27 subject to the final increased offer becoming unconditional.

The Final Increased Offer represents an aggregate amount of 869p, according to the release.
The financial terms are final and will not be increased.
That is the second increase to its original offer, and it represents a 33% vs. the first offer.
The improved offer values the equity of KAZ at £4,012 mn (not including the special dividend), and 4.8x EV/21e EBITDA (vs. 5.6x for the initial offer, the Capital IQ consensus 2021e EBITDA has since been revised upwards by c. 26%). It is also a 4.5% discount to the median Ind. NAVPS (Capital IQ consensus).

In my 5 February Insight (KAZ Minerals: Sweetened Offer but Maybe Not Convincing Enough) I had mentioned that the 4 February sweetened offer was not final and that an improved offer could come and would take into account the lower end of what investors estimate Baimskaya is worth, an equity value of 846p.
Chinese demand is contributing to the copper price increases. The spot price of copper reached a 5-year high on 25 February 2021 of $9,456/t.
Deadline to accept the offer is 13.00 (London time) on 9 April, two weeks from now, which translates the pressure to either accept the improved and final offer (a good return from the first offer) or let it lapse and trust Chinese demand will keep on pushing copper prices.
In the absence of any material change, I believe this is it (and a good run from the initial offer). Kim and Novachuk will have the company for themselves (with its commodity and political risks) and shareholders have (fairly) grabbed a 33% increase (part of the future FCF from Baimskaya). Recommendation is Long KAZ TP 869 and tender. Gross spread is 0.57%, or c. 2.3% annualized.

KAZ Minerals

Kaz Minerals: Time to Cash In