Key Points
-
BHP pulls back from a $60 billion bid for Anglo American after preliminary board discussions.
-
The miner emphasizes organic growth and copper production over acquisitions.
-
Anglo Teck merger votes are still scheduled for December, with BHP restricted from rebidding for six months.
BHP on Monday abandoned its final bid to acquire Anglo American, just two weeks before shareholders at Anglo and Canada’s Teck Resources were set to vote on a $60 billion merger.
The Australian miner said it would no longer pursue a combination with Anglo after preliminary discussions with the company’s board. The announcement came in a release to Australia’s securities exchange following reports of the talks late Sunday.
BHP said the merger still held “strong strategic merit” and could have created value for stakeholders. The company, however, remains confident in its own organic growth strategy.
“It’s a last throw of the dice for BHP,” said Andy Forster, portfolio manager at Argo Investments in Sydney, which holds BHP shares. “I’m surprised they considered returning for another deal to extract value for shareholders.”
Shares of Anglo have risen roughly 16 percent this year, while BHP’s climbed 2 percent. BHP’s stock rose 0.4 percent on Monday.
Copper Expansion Drive
BHP had targeted Anglo to expand its copper operations, a key metal for the global energy transition. The company already leads global copper production but risks losing the top spot without major new projects.
The withdrawal comes just before December 9 shareholder votes on the Anglo-Teck merger. The deal would create a copper giant with significant development projects in Chile and Peru.
“There are only a few opportunities when assets like this are available, so it made sense for BHP to assess it. But the situation is messy,” said Kaan Peker, an analyst at RBC in Sydney.
UK securities rules prevent BHP from making another bid for Anglo for six months.
BHP Focuses on Organic Growth
After Anglo rejected three previous offers, BHP shifted attention to smaller projects, including developments in Argentina.
CEO Mike Henry previously said that in today’s market, it is difficult to find the right combination of assets at a price that creates value for shareholders.
Investors noted that BHP’s focus on capital discipline under former Chairman Ken MacKenzie limited its willingness to pay more for Anglo. The latest bid came under BHP’s new chair, Ross McEwan.
Anglo-Teck Merger Faces Regulatory Hurdles
The Anglo-Teck merger still requires approval under Canada’s Investment Act. Ottawa wants Anglo to redomicile in Canada, but CEO Duncan Wanblad has firmly rejected the move.
Since rejecting BHP’s $49 billion offer in May last year, Anglo has strengthened its share price by exiting its South African platinum unit and implementing a restructuring plan aimed at better shareholder returns. The company has, however, been unable to offload its Australian coal assets.
