Anglo American rejected a raised takeover offer of 34 billion pounds ($42.67 billion) from BHP Group on Monday, saying the world’s largest listed miner “continues to significantly undervalue” the company.
The London-listed miner had earlier rebuffed BHP’s initial $39 billion all-share proposal made on April 25, dismissing it as opportunistic and saying it would dilute the upside value for its shareholders relative to BHP’s.
“The latest proposal from BHP again fails to recognise the value inherent in Anglo American,” Chairman Stuart Chambers said on Monday.
The new offer, made on May 7, was 10% higher than the first, or a 15% increase in the merger exchange ratio to lift Anglo American shareholders’ aggregate ownership in the combined group to 16.6% from 14.8%.
“We are disappointed that this second proposal has been rejected,” BHP CEO Mike Henry said in a statement.
“BHP continues to believe that a combination of the two businesses would deliver significant value for all shareholders.”
The revised bid again required Anglo to sell its shares in iron ore and platinum assets in South Africa, a structure Anglo says is unattractive.
“The BHP proposal … leaves Anglo American, its shareholders and stakeholders, disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover,” Chambers said.
Anglo shares closed down 2.3% at 27.07 pounds, while BHP shares closed up 0.8% at A$43.25 before the announcement.
Anglo is attractive to its competitors for its prized copper assets in Chile and Peru with demand expected to rise as the world moves to cleaner energy and wider use of artificial intelligence.
Its portfolio also includes platinum, iron ore, steelmaking coal, diamonds and a fertiliser project.
“We estimate that if Anglo divested its iron ore, diamonds, manganese and PGM portfolio, the remaining entity would have a c.70% exposure to copper,” RBC Capital Markets analysts said in a note.
“Adding our forecasts for the potential divestments, we calculate 31 pounds per share could be realised, 13% higher than today’s revised offer.”
BHP had offered Anglo American shareholders 27.53 pounds per share, up from 25.08 previously. It has until May 22 to log a binding offer.
Both Anglo and BHP have been meeting investors since April’s initial approach, which followed a review of all of Anglo’s assets initiated in February in response to a 94% plunge in annual profit and writedowns at its diamond and nickel operations.
“Anglo has been trying to restructure for a long time and hasn’t really achieved many of its own goals…There’s no natural bigger party to come over and pay more for Anglo…they would struggle to find anyone better to do the deal with,” said Daniel Sullivan, portfolio manager at Janus Henderson Investors.
Anglo’s investors are concerned that they stand to lose heavily by holding shares in the South African subsidiaries if they are spun out. BHP said their new proposal would bear the costs of the unbundling.
“I’m intrigued why BHP are so obsessed with maintaining the original structure when it was flagged by many as an obstacle to the deal,” said Nicholas Stein, a portfolio manager at Coronation Fund Managers, a top-20 investor in Anglo.
Anglo in March picked investment bank RBC Capital Markets to begin a syndication process for its costly Woodsmith fertiliser project in northeast England, two sources previously said.
Another source said Anglo was looking for partners for its De Beers diamonds business, which is among the assets BHP has said it would review after completion of any deal.
The company said on Monday it had accelerated plans to deliver its standalone strategy and would update investors on them on Tuesday.
The mining sector has seen a jump in M&A activity recently, with a total deal value of $26.4 billion in 2023, S&P Global Market Intelligence data shows.
“The big miners all benchmark themselves to each other. They will be taking a keen interest,” said SP Angel analyst John Meyer.
Source: Reuters.com