Anglo rejects third BHP bid, but Australian miner remains confident
23 May 2024
Anglo American has once again rebuffed BHP's advances, rejecting the mining giant's third unsolicited takeover proposal. The latest bid, valuing Anglo American at approximately £29.34 per share, was deemed insufficient by Anglo American's board, which expressed concerns about the proposal's complex structure and associated risks.
The merger would create a mining giant with a more extensive and diverse portfolio of assets, including copper, potash, iron ore, and metallurgical coal. This increased scale would give BHP greater market power and resilience against commodity price fluctuations.
BHP offered to buy Anglo American in an all-stock deal, but only if Anglo first split off two of its businesses (Anglo American Platinum and Kumba Iron Ore).
Anglo's leadership expressed concern that this requirement would unfairly disadvantage their shareholders by introducing significant risks and potentially reducing the overall value of the deal.
The board also emphasised the unprecedented nature of pursuing two simultaneous demergers of publicly listed companies alongside a takeover.
This would necessitate additional approvals and conditions, particularly in South Africa, and significantly extend the timeline to completion, potentially leading to value leakage.
Stuart Chambers, chairman of Anglo American, commented:
The Board is confident in Anglo American’s standalone future prospects and believes that Anglo American has set out a clear pathway and timeframe to deliver the acceleration of its strategy to unlock significant and undiluted value for Anglo American’s shareholders. The Board considered BHP’s Latest Proposal carefully, concluded it does not meet expectations of value delivered to Anglo American’s shareholders, and has unanimously rejected it. In particular, it does not address the Board’s concerns about the structure, which results in significant complexity, execution risks, an extended timeline to completion and consequently has the potential for material value leakage to be disproportionately suffered by Anglo American’s shareholders. Multiple engagements with the BHP team have not yet been able to resolve the concerns on these issues. However, the Board is willing to continue to engage with BHP and its advisers on this topic and has therefore requested a one-week extension to the PUSU deadline which has been consented to by the Panel.
Despite rejecting the offer, Anglo American has agreed to extend the deadline for BHP to make a formal offer until 29 May 2024. This extension aims to facilitate further engagement on risk mitigation and value impact concerns.
BHP holds firm
Reuters reported that BHP remains confident in its proposal and plans to focus on addressing Anglo's concerns over execution risks.
Sources close to the Australian miner indicate that the company will stand firm on the structure and value of its offer, aiming to convince Anglo of the deal's merits through detailed discussions on an asset-by-asset basis.
BHP has also offered to cover the costs associated with the demerger of Kumba Iron Ore, which is estimated to generate a substantial capital gains tax for the South African government.
This move could potentially alleviate some of Anglo American's financial concerns.
Analysts believe that BHP's ultimate goal is to persuade Anglo to open its books and allow a further extension of the negotiation deadline.
The mining giant is reportedly engaged in joint meetings with UK and Australian regulators to ensure a smooth regulatory process if the deal progresses.
If the deal does not materialise, Anglo American's CEO, Duncan Wanblad, will face pressure to maximise the value of its divestments and ensure a smooth execution of its standalone strategy. Failure to do so could leave the company vulnerable to another takeover attempt by BHP.
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