The company logo adorns the side of the BHP gobal headquarters in Melbourne on February 21, 2023.WILLIAM WEST
Anglo American PLC NGLOY has rejected a third takeover proposal from BHP Group Ltd. BHP-N but is opening the door to reaching a friendly deal by obtaining an extension of the deadline for its suitor to make a firm offer.
Melbourne-based BHP on Wednesday announced it had improved its proposal to 0.886 of its own shares for each Anglo share, valuing the mining company at £31.11 (US$39.60) a share or US$49.1-billion. BHP’s latest offer is 11.3 per cent higher than its second proposal a little more than a week ago, and a 24.8-per-cent improvement over its original offer in April.
But London-based Anglo in rebuffing BHP once again drew attention to its complicated proposal, which is contingent on Anglo spinning off two businesses, its controlling stakes in Anglo American Platinum (Amplats) and Kumba Iron Ore (Kumba).
Anglo in a release reiterated that it has “serious concerns with the structure,” specifically around whether the spinoffs can be executed successfully, and the risk that its shareholders could be punished in the process.
“The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented,” Anglo said.
Anglo said, however, that it is willing to keep talking to BHP, and it succeeded in convincing the British takeover panel to push out the “put up or shut up” deadline for BHP to make a firm offer by a week. The world’s biggest mining company has until 5 p.m. BST on May 29 to table its firm offer for Anglo.
“The seven-day extension granted provides some room for negotiation,” Marina Calero, analyst with RBC Europe, wrote in a note to clients. “Something that in our view increases the chances of an agreement being reached.”
Given the execution risk involved in the divestment of Kumba and Amplats, Ms. Calero opined that Anglo’s board will require either a higher price from BHP, a change in the structure of the deal, or both.
BHP on Wednesday, however, said its latest offer for Anglo is its “best and final.” And chief executive Mike Henry just last week vowed not to overspend on the deal.
Christopher LaFemina, analyst with Jefferies, said in a note to clients that while BHP may be insisting its proposal is final, if a third-party bid emerges, that would give it the licence to hike the price. Mr. LaFemina indeed predicts that will happen, with Swiss commodities trading and mining giant Glencore PLC likely taking a run at Anglo.
“We have long believed that Glencore and Anglo make a compelling strategic combination, and it would be a surprise to us if BHP acquires Anglo without Glencore at least attempting to get involved in some way, shape or form,” Mr. LaFemina said. “The bottom line: Watch this space. This is not over yet.”
Anglo in 2023 performed extremely poorly and its share price fell steeply, making it vulnerable to a takeover. Dragging down the stock was an extremely costly construction of a giant fertilizer mine in Britain, a prolonged slump in the diamond market, and a shocking cut in its long-term copper, iron ore and platinum production forecasts.
Anglo recently unveiled its own convoluted plan to fend off the takeover from BHP that would see it remain as a stand-alone. Under that initiative, Anglo plans to spin off Amplats and likely sell its metallurgical coal, diamonds and nickel businesses.
BHP is primarily interested in Anglo because of its copper business. If it buys Anglo, BHP will become the world’s biggest copper producer, bypassing Chile’s Codelco. BHP had already broadened its exposure to copper by buying fellow Australian miner Oz Minerals for US$6.4-billion last year.
BHP has some history in walking away from takeover deals when they get too expensive. In 2021, it abandoned its plan to buy Canadian junior mining company Noront Resources Ltd. after engaging in a protracted bidding war with Australian competitor Wyloo Metals Pty Ltd.