Anglo American rejects BHP’s revised £34bn Offer

The FTSE 100 mining company rejected a sweetened £34 billion bid from BHP to acquire its Anglo American rival as “highly inattractive”.

BHP revealed that it submitted a revised proposal for Anglo on Tuesday. However, just like the initial £31 billion proposal made last month, this is subject to Anglo’s South African iron ore and platinum operations being spun off.

BHP increased its offer by 14.6% to 0.8132 BHP Shares per Anglo Share, which translates into a price per share of £27.53, up from £25 in its original April 16 proposal. The company has said that it will offer Anglo American two board positions in the combined group. It is confident of obtaining regulatory approvals.

The world’s biggest copper miner would be created if the company were to take over, and produce an estimated 10% of global output.

Copper is used to make a variety of green technologies such as electric cars, wind turbines, and energy networks. The industry is racing to secure copper resources required to transition to low carbon energy sources.

Anglo has copper mines in Peru, Chile, and the ability to produce 760,000 tonnes per year. This makes it a major player.

BHP expressed disappointment that Anglo, under the leadership of Stuart Chambers as its chairman, had “chosen not to engage” BHP in relation to its improved approach.

Mike Henry, BHP’s chief executive, stated that the deal would create “a leading portfolio of high quality assets in copper ore, potash, and iron ore”

Mike Henry, BHP’s chief executive, stated that its revised proposal is a “win-win” for BHP and Anglo shareholders. The revised proposal represents an increase of 15% in the merger exchange rate and increases Anglo American’s aggregate ownership in combined group from 14.8 to 16.6%.

Henry, 57 years old, said that the deal will create a “leading asset portfolio in high-quality assets such as copper, potash and iron ore”.

Anglo, advised Centerview Partners, Goldman Sachs, and Morgan Stanley said BHP’s latest approach “continues undervalue Anglo American, its future prospects”, and proposes a “highly undesirable” structure, given the inherent uncertainty, complexity, and execution risks.

Chambers, who is 67 years old, stated: “This puts Anglo American and its shareholders, as well as other stakeholders, at disproportionate risk due to the substantial uncertainty created by the proposed conditional execution of the two demergers.

BHP now has until 22 May to announce a firm bid or walk away. This is in accordance with City takeover regulations. It follows speculations about a possible bidding war between BHP and its competitor Glencore.

Anglo’s management is also under pressure to make a strategic decision before Tuesday’s important investor update. This includes De Beers and its diamond business which would be the subject of a “strategic assessment” following a BHP acquisition.

Anglo has been in contact with its shareholders ever since BHP made their approach public. Some, like Legal & General have publicly criticized it, calling it “opportunistic”.

Analysts from Liberum stated that BHP has “signaled a willingness” to change the share ratio, but not the “doomed structural”. They said: “Clearly a successful offer would require a higher premium that BHP may not be willing to pay. It also appears unlikely that BHP would switch to a vanilla takeover without conditions. “While an improved bid before May 22 may be possible, we find it unlikely that a successful bid or an interloper will engage.”

Analysts at Berenberg stated that they “can see scope for a revised bid from BHP – albeit, not a significant uplift – and that it is likely that another bidder will emerge, such as Glencore”.

They said that they thought a bid at least £29 per Anglo share would be required to get the board’s attention.

Anglo shares closed at 2.40 percent on the London Stock Exchange, while BHP, whose main listing will be in Australia by 2022, but which retains its standard listing in London was down by 0.65 percent.