Days after mining giant BHP launched a takeover bid for competitor Anglo American in April, both companies’ CEOs traveled to South Africa. This trip was crucial as a condition to divest Anglo’s local platinum and iron ore assets was sparking political tensions.
Over 20% of Anglo’s shares are held by South African investors, and the London-listed group is considered nationally significant. Founded in 1917, it employs more than 40,000 people in the country. While Anglo CEO Duncan Wanblad successfully garnered support for his new turnaround strategy during the visit, BHP faced setbacks due to the premature leak of the takeover details.
The bid fell through on Wednesday, and insights from more than half a dozen sources, including investors and former mining executives, revealed that Anglo could fend off BHP’s attempts due in part to the latter’s inability to persuade key shareholders like South Africa’s Public Investment Corporation.
A source familiar with Anglo’s defense strategy cited the proposed structural changes as “extremely challenging to implement,” containing significant risks and showing a lack of sensitivity to the South African context. These issues, according to the source, could have been anticipated.
At a mining conference in Miami, BHP CEO Mike Henry expressed his preference for private negotiations with Anglo. “Unfortunately, it got leaked,” he stated, which led him to travel to South Africa on May 1 with his London banking advisors. His aim was to stabilize investor sentiment and communicate directly with the government about the takeover strategy.
The South African government, surprised by the takeover bid amidst an election cycle, was critical of BHP’s plans to purchase Anglo and divest its South African assets. Mines Minister Gwede Mantashe voiced strong objections to the proposal.
A former director of AngloGold Ashanti highlighted that BHP’s demand for immediate unbundling of Anglo Platinum and Kumba Iron Ore was expected to face resistance due to the company’s deep roots in South Africa. Mandi Dungwa, a portfolio manager at Camissa Asset Management in Cape Town, emphasized the unique approach required for such deals in South Africa, particularly given government sensitivities.
Despite these challenges, Wanblad was active on another front, meeting with Mantashe in Pretoria. His strategy involved spinning off the same platinum mines and selling coal and diamond assets. His proposals, which included retaining the iron ore assets in South Africa, were crafted to respect the company’s legacy.
After Anglo rejected BHP’s enhanced $49 billion bid, Mantashe expressed support for Wanblad’s strategy, despite it involving the divestiture of the platinum unit. He expressed his hope that Anglo would continue to resist BHP’s advances.
The market’s response to Anglo’s restructuring and cost-cutting measures will be crucial, as continued valuation pressures could still leave the company susceptible to future takeover attempts. This situation puts significant pressure on Wanblad to meet performance targets and improve operational efficiencies amidst skepticism about his track record.
Source: Mining Weekly
