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On Wednesday, JPMorgan took a new position on MAC Copper Ltd (MAC:AU), downgrading the stock from Overweight to Neutral. The adjustment is accompanied by a price target set at AUD19.00. The change in stance follows the announcement that Harmony (JO:HARJ) Gold, which is not rated by JPMorgan, has entered into a board-approved agreement to acquire MAC Copper at a price of US$12.25 per share, equivalent to approximately AUD18.93 per share, valuing the equity at $1.03 billion.
Lyndon Fagan from JPMorgan expressed surprise at the modest premium of 20.7% over MAC Copper’s last closing price, considering that the company’s stock has consistently traded around or above the offer levels. He highlighted that JPMorgan’s net present value (NPV) estimate for MAC Copper stands at US$13.60 per share, which suggests that Harmony Gold may be acquiring the copper-focused asset at a 10% discount.
The analyst also noted that since the acquisition deal has been agreed upon by the board, the likelihood of a competing offer emerging is considered low. As a result, JPMorgan’s new price target for MAC Copper is now aligned with the bid price offered in Australian dollars.
The acquisition implies that Harmony Gold is set to take over MAC Copper, with the financial terms of the deal reflecting the agreed upon price per share and the total equity value. The new Neutral rating from JPMorgan indicates a shift in their outlook for MAC Copper’s stock, aligning it with the immediate future dictated by the acquisition terms.
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