Anglo American (LON: AAL), one of the world’s leading mining companies, has once again declined a takeover bid from BHP (ASX: BHP), the largest miner globally. This third rejection came despite the bid being valued at an impressive $49.2 billion (£38.6 billion). However, in a significant turn of events, Anglo American has granted BHP an extension until May 29 at 5pm GMT to submit a formal, binding offer. This extension provides BHP additional time to possibly revise its proposal amidst Anglo American’s ongoing major restructuring efforts.
The latest proposal from BHP, which was turned down, valued Anglo American’s shares at £29.34 each, calculated based on the stock’s closing price on April 23. This valuation represents a 47% premium over the current stock price, a tempting offer that BHP hoped would win over shareholders. BHP’s Chief Executive, Mike Henry, emphasized that this “final offer” would allot Anglo American shareholders a 17.8% stake in the merged entity of BHP and Anglo American.
Henry articulated the rationale behind their proposal, stating, “The revised proposal is underpinned by BHP’s disciplined approach to mergers and acquisitions and our focus on delivering long-term fundamental value.” Despite this seemingly attractive offer, Anglo American’s board has expressed persistent reservations.
The primary concerns from Anglo American revolve around the structural demands BHP has placed, which the board believes could pose significant completion risks and potential value erosion. These concerns are particularly poignant given that these risks are seen as disproportionately impacting Anglo American’s shareholders, a scenario the company is keen to avoid.
Adding another layer to the complexity of the negotiations, the Public Investment Corporation (PIC), South Africa’s state-owned asset manager and the second-largest investor in Anglo American, has intervened. The PIC has called for a “meaningful revision” of BHP’s proposal. This suggests that the investor community, particularly significant stakeholders like PIC, are not fully convinced of the merits of BHP’s current terms and are advocating for terms that better safeguard their investment interests.
Amidst these high-stakes discussions, Anglo American is not just passively defending against takeover attempts. The company is actively engaging in a comprehensive business overhaul aimed at enhancing profitability and operational efficiency. This strategy involves divesting from its less profitable units, including those in coal, nickel, diamond, and platinum sectors. The intention behind this restructuring is clear: streamline operations and focus on the most profitable areas to maximize shareholder value independently of any takeover bids.
This strategic maneuvering by Anglo American points to a broader trend in the mining industry, where companies are increasingly focusing on core operations and shedding less lucrative or more environmentally contentious assets. This shift is partly driven by growing environmental concerns and the global push towards sustainable and responsible mining practices.
