2024-04-25 10:00:00
BHP proposed a £31 billion, nearly $39 billion, takeover of Anglo American that would unite two global mining companies and rank as one of the industry’s biggest deals in years..
The world’s largest mining group said so on Thursday had offered 0.7097 BHP shares for each Anglo share, as it sought to expand its portfolio of copper mines.
BHP said its offer valued each Anglo share at £25.08. Anglo shares rose 13% to 24.89 pounds in early London trading, giving the company a market value of 30.5 billion pounds, or about $38 billion..
Demand for copper is expected to skyrocket due to a global transition away from fossil fuels. The metal is widely used in renewable energy projects and electric vehicles.
The deal will elevate BHP to the rank of the world’s largest copper producer, up from its current third largest producer position. according to RBC. The combined group will generate more than 2 million tonnes of copper per year, around 10% of the world’s mining supply.
BHP said it would increase its “commodity exposure going forward through Anglo American’s world-class copper assets”. An alliance involving the two listed groups would be one of the most influential in the mining sector since Glencore’s acquisition of Xstrata in 2013.
Anglo owns some of the most sought-after copper mines in the sector in Chile and Peru, But CEO Duncan Wanblad has been under intense pressure since December, when the company revealed major downgrades to production forecasts. Anglo said it had received an unsolicited offer from BHP and was considering it.
De Beers’ diamond division and platinum metals unit have been hit by low prices. The company’s London-listed shares had fallen by more than a third since early last year before rising on news of the bid.
Shares in BHP, which is primarily listed in Sydney and has a market capitalization of A$229 billion (US$149 billion), fell 0.6% to A$45.23 on Thursday.
Agreement details
Anglo said so, as part of any dealBHP proposed spin-offs of two Anglo entities: Anglo American Platinum, the platinum division known as Amplats, and Kumba Iron Ore. Both are listed in South Africa and represent around £10.2 billion in value under BHP’s proposal. The proposal is likely to cause controversy in South Africa ahead of the country’s general election in May.
BHP said so Anglo American’s other non-copper, iron ore and metallurgical coal operations – such as the De Beers business – will be “subject to a post-completion strategic review”.
BHP’s approach to Anglo comes a year after the Melbourne-based miner completed a $9.6 billion acquisition of Australian rival Oz Minerals, increasing its exposure to copper.
The deal started a wave of transactions in the industry, but BHP management has since said it would be disciplined in its approach to future mergers and acquisitions as it focused on integrating Oz and funding the development of its potash business.
BHP exited the main London listing in 2022, simplifying its corporate structure to better prepare it for potential consolidation opportunities following the sale of its oil and gas business, which merged with Australia’s Woodside in the same year.
Anglo, founded 107 years ago, is among the 25 most valuable companies on the London Stock Exchange and BHP’s proposal is likely to fuel fears of companies fleeing the British capital.
Some BHP investors said there were very few details on whether the acquisition would appeal to shareholders, but others said it made sense given BHP’s focus on expanding its copper portfolio..
Low price?
Andy Forster, chief investment officer at Argo Investments, which owns BHP shares, said the deal would ultimately be assessed on cost. “It makes sense for copper, but as always with large, complex transactions (it’s) difficult to pull off without destroying value along the way,” he said.
Jefferies analyst Christopher LaFemina said in a note that ““We would be surprised if this was BHP’s final offer as the price is clearly too low to succeed,” estimating at least £28 per share would be required for serious talks. He added that rival bidders could emerge..
Anglo is advised by Centerview, Goldman Sachs and Morgan Stanley. UBS and Barclays are advising BHP on the proposal, according to people familiar with the matter. Bloomberg first reported that BHP was considering buying Anglo. BHP has until 22 May to submit a formal offer.
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