LONDON – KAZ Minerals' fifth biggest investor says it plans to vote against a £3-billion take-private plan orchestrated by the company's chairman, Oleg Novachuk, because it undervalues it.
A consortium, led by Novachuk and KAZ director Vladimir Kim, last month offered 640p for the 61% of the mining company's shares it doesn't already own to take it private.
The all-cash deal would offer minority shareholders a 12% premium on the previous day's close. Acquisitions involving copper assets bear a premium of at least 15%, analysts say.
"We are deeply underwhelmed by the offer, as we believe it materially undervalues the company's existing and future projects and, under current conditions, we will look to vote against the proposal in order to preserve shareholders' interests," James Johnstone, co-head of the RWC Emerging and Frontier Markets team, said in a written statement.
RWC Partners, which runs $9-billion in emerging and frontier markets, owns just under 3.3% of KAZ Minerals.
"Following extensive negotiations, the Independent Committee of KAZ Minerals intends to unanimously recommend the acquisition to KAZ Minerals shareholders as it represents an opportunity to realise their investment at a premium in cash in the near term," said Michael Lynch-Bell, senior independent director and chair of the independent committee.
KAZ is the largest copper producer in Kazakhstan. Copper is used make motors, batteries, wiring and other goods as it is one of the best electrical conductors. Electric vehicles are seen as a major growth area for the metal over the next decade.
KAZ's share price had gained 18% so far this year before it was locked by the offer. It skyrocketed by 240% within three years of listing in 2005, but currently trades at about the same price as when it first listed.
The global X Copper Miners exchange-traded fund, which tracks the main producers of the metal, including Canada's First Quantum and Ivanhoe and London-listed Antofagasta, has also risen by 18% so far this year.
The consortium believes KAZ's long-term interests are best served as a private company, due to the company's capital intensive strategy.
It also said the development of the Baimskaya copper mine, bought in 2018 and needing a $7 billion investment, in east Russia would "be best undertaken away from public markets".
Immediately after KAZ Minerals announced its acquisition of Baimskaya in 2018, its share price plunged because of investor concerns about Russian risk, even though Baimskaya is regarded as one of the world's most significant underdeveloped copper prospects.
The take-private deal is subject to court approval and a shareholder vote in December or early January. It would be put in doubt if does not reach the approval of 75% of shareholders by value - excluding Novachuk and Kim, who will not vote.