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Anglo American has rejected an improved takeover proposal from rival BHP that values the UK-listed miner at £34bn, intensifying the battle between two titans of the global mining industry.
BHP’s new non binding, all-share proposal valued its smaller rival at £27.53 per share — up from approximately £25 per share in last month’s original offer, the Australian group said on Monday.
The latest bid from BHP represented a 15 per cent increase in the merger ratio in its previous proposal, according to BHP, and about a 30 per cent premium to Anglo’s share price before takeover talks become public.
BHP said it was “disappointed that the Anglo American board has chosen not to engage”. The Australian miner said this new approach did not amount to a firm intention to make an offer and has still until next Wednesday to decide whether to make a formal bid.
Anglo said in a statement that its board had assessed that BHP’s revised non-binding offer was still “significantly” undervaluing the company’s assets and its prospects, reiterating that the structure was “highly unattractive” for shareholders. Last month it rebuffed a first unsolicited £31bn takeover approach from BHP for similar reasons.
Anglo shares fell 0.4 per cent to £27.60 in London, giving the company a market value of £37bn.
The details of BHP’s latest approach, coming a day before a large industry gathering in Miami, put the pressure on Anglo’s chief executive Duncan Wanblad to demonstrate that a standalone strategy would deliver better returns for investors.
BHP is eyeing Anglo’s copper mines in Latin America: A merger between the two groups would create the world’s biggest producer of the metal critical to the world’s efforts to decarbonise. It would also enlarge BHP’s footprint in iron ore and steelmaking coal. The deal would be the mining sector’s largest ever.
BHP chief executive Mike Henry said on Monday the “win-win” proposal would have lifted Anglo shareholders’ aggregate ownership in the combined company to 16.6 per cent, compared with 14.8 per cent under the first indicative offer.
However, the new proposal maintained a provision requiring Anglo to spin off two South African businesses before the transaction — something that has provoked a backlash from Pretoria. South African state-owned entity Public Investment Corporation (PIC) is Anglo’s second-biggest shareholder.
BHP said it continued “to believe that a combination of the two businesses would deliver significant value for all shareholders”.
“We are disappointed that this second proposal has been rejected,” Henry said.
Mark Kelly, chief executive of MKP Advisors, said that “BHP are clearly reserving the right to go hostile”.
George Cheveley, portfolio manager at Ninety One, an Anglo and BHP shareholder, said his initial reaction to the revised proposal was that “we need to wait and see what Anglo’s own plan is”.
Since December, when Anglo’s shares suffered their worst one-day fall, Wanblad has promised to present a plan to overhaul the sprawling producer of iron ore, platinum, copper and other minerals after conducting a systematic asset review. Anglo said it would present those plans on Tuesday.
Some investors have predicted that the company founded 107 years ago in South Africa will be bought or broken up. Anglo’s challenges have also attracted activist hedge fund Elliott Management, which built up a sizeable stake in the company.
BHP said there would be “meaningful synergies”, without specifying a number. Analysts at RBC said they estimated an offer above £30 per share would be needed to sway all of Anglo’s shareholders.
BHP added in its new proposal that it would hand up to two board seats to Anglo, as well as clarifying that it would bear costs from demerging the South African units. That would include a $2bn capital gains tax charge to South Africa, according to people familiar with the matter.
