The BHP global headquarters, in Melbourne, Australia, on Feb. 21, 2023.WILLIAM WEST/Getty Images
BHP Group’s effort to become the world’s biggest copper miner ran into another roadblock after smaller rival Anglo American rejected BHP’s second takeover proposal.
BHP on Monday said its new proposal represented a 15-per-cent increase to the opening share exchange offer. If the improved offer had been accepted, Anglo shareholders’ ownership of the enlarged group would have gone to 16.6 per cent from 14.8 per cent.
“BHP put forward a revised proposal to the Anglo American board that we strongly believe would be a win-win for BHP and Anglo American shareholders,” Mike Henry, the Canadian chief executive officer of BHP, said in a statement. “We are disappointed that second proposal has been rejected.”
Mr. Henry now has to decide whether to raise BHP’s offer premium again in an effort to negotiate a friendly deal, launch a hostile offer or walk away. Under British takeover rules, BHP has until May 22 to submit a binding takeover offer or abandon the pursuit of London-based Anglo, which is less than a third of BHP’s size.
If he decides to walk, Anglo’s executives, led by CEO Duncan Wanblad, will come under pressure to announce their own value-adding strategic moves. The company may unveil a new plan as early as this week at a mining conference in Miami, which many of the world’s top mining CEOs are expected to attend.
“The latest proposal from BHP again fails to recognize the value inherent in Anglo American. … The Anglo American team is focused on delivering against its strategic priorities of operational excellence, portfolio simplification and growth,” said Anglo chairman Stuart Chambers.
A series of blunders, including severe cost overruns at Anglo’s capital-hungry Woodsmith polyhalite fertilizer mine in England, and surprising iron ore and copper production shortfalls, hammered the company’s share price last year and early this year. The fallen price made Anglo vulnerable to takeover offers.
BHP’s improved proposal was pitched to the Anglo board on May 7, two weeks after a leak forced BHP to reveal that it had made a takeover approach. That opening proposal was pitched at about US$39-billion, representing a 31-per-cent premium on Anglo’s implied value.
BHP stipulated that the offer could only go ahead if Anglo were to spin off two large South African, majority-owned companies – Anglo American Platinum (Amplats) and Kumba Iron Ore – that BHP did not want.
The new proposal was worth about US$43-billion but was still conditional on Anglo demerging Amplats and Kumba.
Analysts have said that BHP’s offer is overly complicated and risky, since it not only requires the two spinoffs but also would see BHP sell some of the rest of Anglo, including its De Beers diamond division and other unwanted assets. The sale of those businesses could be lengthy and not fetch premium prices. In a note published last week, Angus Aitken of Australian investment firm Aitken Mount Capital Partners said, “In our view, this deal really does have the potential to be a complete mess for BHP.”
BHP is largely attracted to Anglo’s copper assets, anchored by big mines in Chile and Peru. Copper is considered a critical metal in the transformation to a low-carbon economy. It is an essential component of electric vehicles, wind turbines, solar panels and batteries of all sizes.
A merger between the two companies would create the world’s biggest producer of copper. Buying Anglo would also enlarge BHP’s presence in iron ore and steel-making coal.
BHP shares, which are listed in Sydney, Australia, traded more or less flat on Monday, as did Anglo shares, which trade in London. No other big mining company has openly expressed an interest in pursuing Anglo, though some have engaged financial advisers to examine their options.