Anglo American, a UK-listed mining company, has rebuffed BHP’s overture to purchase and dismantle the company for £31 billion. According to Anglo American, BHP’s proposition significantly devalues the company and presents a substantial unattractiveness to its investors.
The proposal put forth by BHP, based in Australia, unsurprisingly did not include Anglo American’s lucrative platinum and iron ore businesses situated in South Africa, which operate as separate entities.
Shareholders’ anxieties around the underestimation of Anglo’s value by BHP caused BHP’s shares to shrink almost 5% this past Friday. Consequently, the devaluation of BHP’s share price has now reduced the deal’s worth to less than the initially proposed £31 billion.
Notwithstanding BHP’s commitment to strengthen its rank as the world’s largest copper and steelmaking coal manufacturer, Stuart Chambers, chairman of Anglo American, criticised BHP’s proposal as opportunistic and a plain disregard of Anglo American’s future prospects. He further criticised the offer for creating massive ambiguity and significant execution risk, largely shouldered by Anglo American, its investors, and other stakeholders.
Larger shareholders of Anglo American opined that BHP’s offer severely undervalues the target firm. In anonymity, one investor claimed his confidence in not being underwhelmed by BHP’s customary move — paying higher than their initial offer.
Anglo American has been analysing its assets, which include the De Beers diamond division, platinum metals, and metallurgical coal. According to some shareholders, BHP’s approach has instigated pressure on Anglo American to either dispose of or reorganise their frail assets to accurately reflect the worth of its valued copper mines located in Peru and Chile, in their share price.
BHP kept mum when asked for a comment on the refusal of the proposal by Anglo American.
An anonymous mining sector banker stressed on the intricacy of the combo deal and how the political and antitrust risk it posed may result in both firms experiencing erratic share prices for some time.
Kaan Peker, a market analyst from RBC Capital Markets, suggested that a more attractive package might be necessary for the initial offer, claiming it appears to be exploiting the weak share price of Anglo American.
This move made by BHP, a Melbourne-based company informally referred to as “The Big Australian” back in its home country, symbolizes the latest endeavour to revamp the international mining sector.
BHP, under the leadership of the company’s veteran Mike Henry who assumed the role of CEO four years ago, has realigned its business towards what it has termed “future-facing” minerals. This includes copper, potash, and iron ore, while simultaneously parting with its oil and gas exploration assets.
The desire to expand its copper footprint led to the procurement of OZ Minerals in South Australia for $6.4 billion last year. The prospective deal with Anglo poses a significantly higher risk for BHP; this has been likened to its 2001 merger with Billiton, a previously London listed South African mining firm. BHP’s 2007 proposal to purchase competitor Rio Tinto was another episode in its ongoing efforts to revolutionise the industry. – Copyright The Financial Times Limited 2024