BHP's Revised £27.94 per Share Bid for Anglo American Rejected

Anglo American rejects BHP Group's revised £34 billion takeover bid, citing insufficient value. BHP CEO Mike Henry expresses disappointment, but remains committed to pursuing a deal.

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Nitish Verma
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BHP's Revised £27.94 per Share Bid for Anglo American Rejected

BHP's Revised £27.94 per Share Bid for Anglo American Rejected

Anglo American has rejected a revised takeover bid from BHP Group, valuing the London-based miner at approximately £34 billion ($43 billion). The improved offer, which was tabled on May 7, represents a 37% premium to the broker median net asset value (NAV) but was deemed insufficient by Anglo American's board and the South African government.

Why this matters: The proposed takeover has significant implications for theglobal mining industry, as it could create the world's largest copper producer and reshape the industry's landscape. The deal's outcome may also influence the trajectory of the energy transition, as copper is a crucial metal in the production of renewable energy technologies.

BHP CEO Mike Henry expressed disappointment at the rejection, stating, "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. We are disappointed that this second proposal has been rejected." Despite the setback, Henry continues to push for a deal, citing the benefits of a combined entity, including increased investment capabilities.

The proposed deal faces several hurdles, including the complex structure requiring Anglo American to demerge its two major South African units before the acquisition. This spinoff would add complexity and risk to the transaction, potentially incurring a $2 billion tax bill. Furthermore, the offered price of £27.53 per share is still considered too low by Anglo American's board, given the company's long-life assets and potential to reach £36 per share if production issues are resolved.

Anglo American, founded in South Africa in 1917 by Ernest Oppenheimer, has deep roots in the country, with its operations accounting for about a quarter of its revenues. The company has invested over $8.4 billion in its South African operations between 2018 and 2023. The South African government, which owns nearly 7% of Anglo American through the Public Investment Corporation, has expressed concerns about the potential decline of the country's mining sector and the impact on jobs if BHP's takeover bid succeeds.

BHP's takeover offer is focused on creating the world's main producer of copper, a key metal in the energy transition. The Australian miner plans to hive off Anglo American's platinum and iron ore production activities in South Africa. However, Anglo American's board, led by chairman Stuart Chambers, is under pressure to present a compelling standalone strategy, including potential asset sales, to boost shareholder value and defend against the takeover bid.

The revised bid from BHP comes two weeks after its initial offer, which was valued at around $60 billion. Analysts at RBC Capital Markets estimate that BHP's initial proposal will create between $4.1 billion to $6.8 billion in synergies for the merged company, with the takeover value for Anglo American potentially reaching as much as £31 per share. As the global merger battle escalates, the pressure mounts on Anglo American to demonstrate its ability to deliver more value as a standalone entity.

Key Takeaways

  • Anglo American rejects BHP's revised £34 billion takeover bid.
  • The deal would create the world's largest copper producer, impacting the global mining industry.
  • BHP's bid faces hurdles, including complex demerger and potential $2 billion tax bill.
  • South African government opposes the takeover, citing concerns over mining sector decline and job losses.
  • Anglo American's board must present a standalone strategy to boost shareholder value and defend against the bid.