KGHM Hostile Bid Comment Fails to Impress as Copper Advances

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KGHM Polska Miedz SA rose along with the price of copper on Monday amid skepticism about the chief executive’s comments about a potential hostile bid.

Poland’s sole copper and silver producer may be the target of an unwanted takeover attempt, CEO Herbert Wirth said in an interview published by Wprost magazine on Monday. The company’s shares advanced 2.5 percent to 94.9 zloty at 4:43 p.m. in Warsaw. Copper gained 1.4 percent in London.

KGHM, in which the government holds a 31.79 percent stake, may be at risk of a bid because it’s undervalued by as much as 40 percent, Wirth was cited as saying by Wprost. While the company’s valuation is low relative peers, potential investors are “discouraged” by government control and the possibility of additional taxes, according Tomasz Duda, an equity analyst at Erste Group Bank AG in Warsaw.

“If the government reduced its stake, perhaps someone would be interested,” Duda said by phone. “The government can also redirect profit by changing the mining tax.”

KGHM trades at 7.9 times its forecast earnings, compared with a median average of 21 times for global peers, according to data compiled by Bloomberg. The company’s shares have slumped 13 percent this year, compared with a 4.2 percent decline in Warsaw’s WIG20 index. Copper has tumbled 17 percent.

Dariusz Wyborski, a spokesman for KGHM, declined to comment on Wirth’s interview.

“A chance of a hostile takeover is very small and not a real threat for KGHM,” Bartlomiej Kubicki, a Warsaw-based analyst at Societe Generale SA said by phone. “All global mining companies are now focused on protecting their free cash flow rather than investing.”

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