After acquiring a $1bn stake in Anglo American rival BHP, activist hedge fund Elliott described its long-term view on the British mining conglomerate as “very interesting” and “very intact”.
Nabeel Bhanji, an equity partner at Elliot, said that the US hedge funds was having a “very positive [and] constructive” dialogue with Anglo management.
Bhanji said at the Due Diligence Conference on Tuesday that the BHP approach was a third-party validation of the fact that this asset has an interesting portfolio but is trading at the incorrect price. “We have billions riding on this bet.”
Bhanji said that BHP’s April approach which caused the London-listed miner to increase its share price by 13 percent was “truly annoying” because the firm “was only part way through our stake building”. Elliott’s stake in the FTSE 100 mining company was 3.5 percent according to official filings from May.
The talks ended at the end of May after BHP made several improvements to its offers.
Elliott invests in both private and public companies and manages $70bn on behalf of investors. It is known for challenging company management when it disagrees strongly with the strategic direction of a company.
Anglo faces pressure to deliver on its radical plan of reshaping the business after BHP’s failed attempt to take over the group. This restructuring includes selling parts of the company to leave the core three divisions, copper, iron ore, and fertiliser.
Duncan Wanblad , chief executive of Anglo, said in September plans to sell businesses such as its DeBeers division would result in “a re-rating”, and Anglo becoming “a very quality business”. Anglo shares have increased by 12 percent in the last month due to the Chinese stimulus measures which have helped mining stocks.
Wanblad said he also expected to complete the sale of Anglo’s coal business in this year. However, a disposition of the diamonds could extend past the planned restructuring timeline.
Investors speculated on whether BHP will bid again for Anglo. It could do so from the end November, according to London takeover regulations. BNP Paribas analysts said in this month that BHP would not bid for Anglo again until it had “more progressed” through the restructuring process.
Anglo reported that it had made progress on its May accelerated plan.
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